The weak military sales were a setback for Boeing, whose shares trade at the highest earnings multiple of any Dow component thanks to hot growth prospects at its commercial jet unit, which was hit by a strike in the quarter.
Boeing shares were down $1.80, or 2.7 percent, to $65.17 on the New York Stock Exchange, and were the top percentage decliners in the Dow Jones industrial average.
"The major disappointment was perhaps the lack of revenue growth," said Paul Nisbet, an analyst at JSA research. "If you look at each of the (defence unit) segments, they all with one exception seem weaker than anticipated."
The world's No 2 commercial jetmaker said its third-quarter net earnings more than doubled to $1.01 billion, or $1.26 a share, from $456 million, or 56 cents a year earlier.
But the quarterly earnings per share would have been 69 cents, according to Reuters Estimates, without gains of 45 cents from the sale of its Rocketdyne propulsion unit and 62 cents from tax settlements and adjustments, and excluding charges for the strike and other items.
That's below the 78 cents before exceptional items that Wall Street analysts had forecast, according to Reuters Estimates.
Revenue fell 4 percent to $12.63 billion, depressed by an 11 percent slide in its defence unit's sales, which Boeing said were hit by the sale of Rocketdyne and a less profitable mix of aircraft deliveries.
Nisbet said that a reported US government decision to shift a big portion of the work on a secret imaging satellite contract from Boeing to rival Lockheed Martin Corp may have contributed to a 19 percent slide in revenues at its launch and orbital systems unit.
Boeing raised its earnings-per-share outlook for the full year to between $2.95 and $3.05 a share, and boosted its 2006 forecast to $3.10 to $3.30 a share. Even after the increase, its EPS forecast still lags Wall Street's, which may have contributed to disappointment, Bank of America said in a note.
Revenues at the commercial aircraft unit rose 6 percent even as deliveries fell 7 percent due to the strike, and its backlog rose 13 percent to $98.1 billion, which Howard Rubel, an analyst at Jefferies & Co, called "relatively strong."
But Boeing did not boost its delivery forecast for 2006 after cutting its delivery outlook to 290 from 320 because of the strike.
Nisbet said Chicago-based Boeing may have renegotiated deliveries with airlines to avoid paying excessive overtime by ramping up production hours next year.
Boeing and its European archrival Airbus - the No 1 jetmaker - have enjoyed a surge in orders this year from fast-growing airlines in India, China and the Middle East.