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Boeing (BA) to Report Q2 Earnings: Can It Pull a Surprise?

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Leading commercial aircraft manufacturer, The Boeing Co. (BA - Free Report) is set to release second-quarter 2016 results before the opening bell on Jul 27. The company posted a negative earnings surprise of 3.87% in the preceding quarter.

Let’s see how things are shaping up for this announcement.

BOEING CO Price and EPS Surprise

BOEING CO Price and EPS Surprise | BOEING CO Quote

Factors at Play

It seems that it will be a difficult year for this aerospace giant. Boeing has stepped into its 100th year of business, with an ominous 10% drop in share price through the first six months. The company also revealed yesterday that it will take a total of $2.05 billion in after-tax earnings charges in the second quarter in relation to three separate programs: the 787, the 747 and the KC-46 tanker aircraft program. As a result, Boeing Commercial Airplanes will register an adverse earnings impact of $2.78 billion while the Boeing Military Aircraft segment of Boeing Defense, Space & Security will report an earnings impact of $219 million on a pretax basis.

The pretax charges arose from delays in developing the new Air Force refueling tanker, dwindling demand for its biggest jetliner, the 747 jumbo, and the deferred costs of its 787 Dreamliner, its most advanced jetliner.

The company explained that a charge of $847 million after tax, or $1.33 a share, will hit Q2 results as two test planes of the 787 made in 2009 are still unsold. The 747 charge of $814 million after tax, or $1.28 a share, reflects the expected weak demand for air cargo deliveries. Finally, the KC-46 tanker charge of $393 million after tax, or 62 cents a share, includes delays in deliveries and hardware issues that Boeing had already announced.

Meanwhile, Boeing has reported mixed Q2 delivery numbers wherein its commercial shipments were up 1% while defense shipments were down 19.6% year over year. Its commercial numbers were mainly driven by higher demand for 777 and 787 Dreamliners. However, the defense segment has suffered from lower deliveries.

Overall, for the second quarter, the Zacks Consensus Estimate for earnings is $2.31 a share, reflecting an increase of 42.59% year over year, while consensus revenues are pegged at $24.45 billion, implying 0.36% year-over-year decline.

Earnings Whispers

Our proven model does not conclusively show that Boeing is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen.

Earnings ESP: Boeing has an Earnings ESP of 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate stand at $2.31.

Zacks Rank: The company carries a Zacks Rank #3 (Hold), which when combined with an ESP of 0.00%, makes surprise prediction difficult.

We caution against Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks that Warrant a Look

Here are some other companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Raytheon Co. has an earnings ESP of +8.82% and a Zacks Rank #3. The company is scheduled to report second-quarter 2016 results on Jul 28.

General Dynamics Corp. (GD - Free Report) has an earnings ESP of +2.17% and a Zacks Rank #2. The company is scheduled to report second-quarter 2016 results on Jul 27.

Orbital ATK Inc. has an earnings ESP of +3.85% and a Zacks Rank #3. The company is expected to report second-quarter 2016 results on Aug 4.

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