Boeing strongly defended its tough stance in a trade dispute with Canada's Bombardier Wednesday, as it reported lower quarterly earnings in part due to unexpected costs on a military contract.

Boeing chief executive Dennis Muilenburg defended a complaint against the Canadian company over alleged illegal subsidies, a dispute that has deepened tensions between Canadian Prime Minister and US President Donald Trump.

"We like competition. It makes us better," Muilenburg said on an earnings conference call. 

"We can win, but it's important that everyone plays by the same rules."

The comments came as Boeing reported an 18.7 percent drop in third-quarter earnings to $1.9 billion. 

Revenues rose 1.7 percent to $24.3 billion.

Results were dented by $329 million in new unexpected costs on the KC-46 military refueling tanker due to changes as the venture moves into late-stage testing and certification. Boeing also booked expenses of more than $1 billion on the tanker in a series of announcements in 2015 and 2016. 

Muilenburg said Boeing was in the home-stretch of the contract, which is ultimately expected to involve hundreds of aircraft over many years.

"We're not completely at the finish line, but we are clearly closing in," Muilenburg said. 

Boeing's commercial division delivered more planes in the third quarter compared with the year-ago period, but the increase came from the narrow-body 737, which is less costly than some other models. 

Revenues and profits in Boeing's military division declined, although analysts believe additional orders in defense should fuel growth in the coming period.

- Tough line on Bombardier -

The aerospace giant lifted its full-year profit forecast range by a dime to $11.20 to $11.40 per share, citing a lower-than-expected tax rate. There was no change to the forecast for revenue or commercial plane deliveries.

Heading into Wednesday's report, Boeing shares were up nearly 75 percent on the year. Analysts were generally upbeat on the results, despite the tanker charge.

"Although Boeing continues to throw off lots of cash and the business is well-positioned for growth in commercial airplanes... we think shares are overvalued," said Morningstar analyst Chris Higgins.

Shares ended down 2.9 percent at $258.42.

Muilenburg took an unwavering stance on the Bombardier controversy, which has led the Department of Commerce to propose heavy duties on Bombardier's new C-Series jetliners.

Bombardier last week reached an agreement with Boeing archrival Airbus on the C-Series planes that appeared to some observers to maneuver around the trade dispute by steering some of the work to Mobile, Alabama, where Airbus has operations.

But Boeing plans to press on with its complaint.

"Recent actions that Bombardier and Airbus announced are not actions that affect our gameplan," Muilenburg said.

Britain and Canada have threatened to halt military contracts to Boeing over the controversy. Delta Air Lines, a major customer of Boeing's, has vowed not to pay extra duties on Bombardier planes it has ordered.

"We're mindful that there are ripple effects," said Muilenburg, who emphasized that Delta remains a "very important customer" and expressed confidence the fight would not lead to devastating consequences with governments who are clients.

"We do think our long-term relationship with the UK and Canada will outlive this trade matter," he said.