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Will Commercial Deliveries Drive Boeing's (BA) Q2 Earnings?

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The Boeing Company (BA - Free Report) is set to release second-quarter 2018 results on Jul 25, before the opening bell. Results in the to-be-reported quarter are anticipated to be primarily driven by regular contract wins and higher commercial jet deliveries.

Let's take a detailed look at the factors influencing Boeing’s quarterly results.

Multiple Contract Wins — A Key Catalyst

Boeing is the largest aircraft manufacturer and one of the major aerospace and defense contractors in the United States. Therefore, it enjoys a solid inflow of contracts from both the Pentagon as well as foreign allies, courtesy of the company’s varied product offerings.

In the second quarter, the company received a number of big orders for its commercial jets. These orders include a $6.6-billion order for 12 767-Freighters and 12 777-Freighters from FedEx Express, a $5.6-billion order for 20 787-9 Dreamliners from Bamboo Airways, a $3-billion order from Ryanair for 25 737 Max-8 jets and a $1.7-billion order from Qatar Airways for five 777 Freighters.

Among the defense contracts won in the second quarter, the significant ones include a $430- million delivery order to provide F/A-18 planned maintenance interval-1 high flight hour depot support, a $416-million modification contract for the full-rate production of three P-8A multi-mission maritime aircraft of the 9th lot and a $312-million modification contract for providing Joint Direct Attack Munition tail kits.

Thus, it goes without saying that such steady inflow of contract wins will surely boost Boeing’s quarterly sales. Evidently, the Zacks Consensus Estimate for the company’s second-quarter sales is pegged at $24 billion, reflecting a year-over-year increase of 5.5%.

The Boeing Company Price and EPS Surprise

The Boeing Company Price and EPS Surprise | The Boeing Company Quote

Q2 Deliveries & Bottom-Line Expectations

Boeing’s second-quarter deliveries reflected a 6% year-over-year improvement in commercial shipments. However, defense shipments declined 64.4% from the year-ago figure. Notably, higher demand for the 737 jets was the primary reason behind the year-over-year improvement in commercial deliveries. Boeing’s total deliveries were 210 units in the second quarter of 2018 compared with 228 a year ago.

On the first-quarter earnings call, the company raised 2018 earnings guidance anticipating higher volumes and lower tax rate. We expect these trends to be reflected in second-quarter results and in turn boost the company’s bottom line. Moreover, solid deliveries from commercial airplane business, which constitute for more than 50% of Boeing’s total revenues should boost the quarterly earnings. Currently, the consensus estimate for the company’s second-quarter earnings is pegged at $3.27 per share, reflecting a solid year-over-year increase of 28.2%.

Solid Cash Flow: A Boon

In the first quarter of 2018, Boeing paid $1 billion in dividends and repurchased 8.9 million shares for $3 billion. This reflects the company’s strong balance sheet and cash flows, which in turn provide it with financial flexibility in matters of incremental dividend, ongoing share repurchases and earnings accretive acquisitions. 

Additionally, Boeing raised its 2018 operating cash flow guidance from $15 billion to the range of $15-$15.5 billion. Considering this, we may expect its second-quarter results to consistently reflect such solid cash flow features and cash deployment capabilities as witnessed in the prior years, courtesy of multiple order wins by Boeing in the quarter. 

What the Zacks Model Unveils

Our proven model does not conclusively show that Boeing is likely to beat earnings 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. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Boeing has an Earnings ESP of 0.00% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Please note that we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Other Stocks That Warrant a Look

Here are some companies in the Aerospace sector that 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 Company is expected to report second-quarter 2018 results on Jul 26. The company has an Earnings ESP of +1.10% and a Zacks Rank #2.

Curtiss-Wright (CW - Free Report) is expected to report second-quarter 2018 results on Jul 25. The company has an Earnings ESP of +0.15% and a Zacks Rank of 2.

Embraer (ERJ - Free Report) is expected to report second-quarter 2018 results on Jul 27. The company has an Earnings ESP of +26.12% and a Zacks Rank #3.

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