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Will Cost Growth for KC-46 Hurt Boeing's (BA) Q4 Earnings?
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The Boeing Company’s (BA - Free Report) Defense, Space & Security segment’s upcoming quarterly results should reflect solid backlog figures on account of steady order flows for its varied product offerings from the Pentagon as well as international allies of the United States. However, a dismal delivery figure and cost growth for KC-46 program remain major concerns. We expect Boeing’s fourth-quarter 2018 results, scheduled for release on Jan 30, to duly reflect these factors.
Solid Order Flow to Boost Backlog
Keeping up with its usual trend, Boeing’s defense business won a number of multi-million-dollar contracts in the fourth quarter. Such solid order flows are likely to have boosted Boeing’s defense backlog in the soon-to-be-reported quarter.
Historically, the company has witnessed an increased order flow for its varied defense products, which in turn has been providing a boost to its defense segment’s revenues. We expect the upcoming quarterly results to reflect similar top-line improvement for this particular segment. The Zacks Consensus Estimate for Boeing’s defense unit’s revenues is pegged at $5,631 million, reflecting a 1.7% rise year over year.
While Boeing continues to make steady progress in securing the final certification for its KC-46 Tanker program, significant cost growth for this project is consistently pushing up the company’s expenses. In the third quarter, Boeing incurred after-tax cost growth of $140 million from this project due to higher-than-expected effort to meet customer requirements for supporting delivery of the initial aircraft as well as incremental delays in certification and testing. We can expect the company’s fourth-quarter results to reflect similar expenses in relation to the KC-46 program.
However, the company is optimistic about registering higher sales volume for its defense products. This, in turn, should enable the segment to eventually register solid earnings growth in the quarter to be reported. In this line, the Zacks Consensus Estimate for Boeing’s defense unit’s earnings is pegged at $590 million, reflecting a year-over-year improvement of 6.7%.
Deliveries – A Gloomy Picture
Boeing announced fourth-quarter 2018 delivery figures on Jan 8, which reflected a 25.6% decline in defense shipments compared with the previous year. Notably, the company’s defense deliveries totaled 32 in the fourth quarter, down from 43 dispatched in the year-ago period. Such poor delivery figures might hurt the defense segment’s top-line growth.
What the Zacks Model Unveils
Our proven model clearly shows that Boeing is likely to beat earnings in the fourth 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.
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.
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 too have the right combination of elements to post an earnings beat this quarter:
Raytheon Company is expected to report fourth-quarter 2018 results on Jan 31. The company has an Earnings ESP of +1.78% and a Zacks Rank of 3.
Northrop Grumman (NOC - Free Report) is expected to report fourth-quarter 2018 results on Jan 31. The company has an Earnings ESP of +2.02% and a Zacks Rank #1.
Huntington Ingalls (HII - Free Report) is expected to report fourth-quarter 2018 results on Feb 14. The company has an Earnings ESP of +7.09% and a Zacks Rank of 3.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
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Will Cost Growth for KC-46 Hurt Boeing's (BA) Q4 Earnings?
The Boeing Company’s (BA - Free Report) Defense, Space & Security segment’s upcoming quarterly results should reflect solid backlog figures on account of steady order flows for its varied product offerings from the Pentagon as well as international allies of the United States. However, a dismal delivery figure and cost growth for KC-46 program remain major concerns. We expect Boeing’s fourth-quarter 2018 results, scheduled for release on Jan 30, to duly reflect these factors.
Solid Order Flow to Boost Backlog
Keeping up with its usual trend, Boeing’s defense business won a number of multi-million-dollar contracts in the fourth quarter. Such solid order flows are likely to have boosted Boeing’s defense backlog in the soon-to-be-reported quarter.
Historically, the company has witnessed an increased order flow for its varied defense products, which in turn has been providing a boost to its defense segment’s revenues. We expect the upcoming quarterly results to reflect similar top-line improvement for this particular segment. The Zacks Consensus Estimate for Boeing’s defense unit’s revenues is pegged at $5,631 million, reflecting a 1.7% rise year over year.
The Boeing Company Price and EPS Surprise
The Boeing Company Price and EPS Surprise | The Boeing Company Quote
Will Cost Growth Mar Q4 Earnings?
While Boeing continues to make steady progress in securing the final certification for its KC-46 Tanker program, significant cost growth for this project is consistently pushing up the company’s expenses. In the third quarter, Boeing incurred after-tax cost growth of $140 million from this project due to higher-than-expected effort to meet customer requirements for supporting delivery of the initial aircraft as well as incremental delays in certification and testing. We can expect the company’s fourth-quarter results to reflect similar expenses in relation to the KC-46 program.
However, the company is optimistic about registering higher sales volume for its defense products. This, in turn, should enable the segment to eventually register solid earnings growth in the quarter to be reported. In this line, the Zacks Consensus Estimate for Boeing’s defense unit’s earnings is pegged at $590 million, reflecting a year-over-year improvement of 6.7%.
Deliveries – A Gloomy Picture
Boeing announced fourth-quarter 2018 delivery figures on Jan 8, which reflected a 25.6% decline in defense shipments compared with the previous year. Notably, the company’s defense deliveries totaled 32 in the fourth quarter, down from 43 dispatched in the year-ago period. Such poor delivery figures might hurt the defense segment’s top-line growth.
What the Zacks Model Unveils
Our proven model clearly shows that Boeing is likely to beat earnings in the fourth 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 +0.31% and a Zacks Rank #1. 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.
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 too have the right combination of elements to post an earnings beat this quarter:
Raytheon Company is expected to report fourth-quarter 2018 results on Jan 31. The company has an Earnings ESP of +1.78% and a Zacks Rank of 3.
Northrop Grumman (NOC - Free Report) is expected to report fourth-quarter 2018 results on Jan 31. The company has an Earnings ESP of +2.02% and a Zacks Rank #1.
Huntington Ingalls (HII - Free Report) is expected to report fourth-quarter 2018 results on Feb 14. The company has an Earnings ESP of +7.09% and a Zacks Rank of 3.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
Click for details >>