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Will 737 Max Program be a Drag on Boeing's (BA) Q1 Earnings?

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The Boeing Company (BA - Free Report) is set to release first-quarter 2019 results on Apr 24, before the opening bell. Its 737 Max aircraft, which was grounded world-wide in March following two fatal crashes, is expected to impact its earnings growth in the to-be-reported quarter.

The company surpassed the Zacks Consensus Estimate in the last reported quarter, with an earnings surprise of 21.24%.

Let's take a detailed look at the factors influencing Boeing’s performance in the first quarter.

737 Max Aircraft: A Major Concern

Once considered a key catalyst to the company’s top line, Boeing’s 737 Max jets have now become a major concern for the investors of this aerospace giant. With each day progressing toward its earnings release, analysts are increasingly focusing on its 737 program. They anticipate that two fatal crashes and the subsequent grounding of these planes might weigh on the company’s bottom line in the quarter to be reported.

Analysts have expressed their concern by lowering the bottom-line expectation for the current reporting cycle. Evidently, the Zacks Consensus Estimate for the company’s first-quarter earnings moved 22% south over the past 60 days to $3.34. The estimate also reflects an 8.2% decline year over year. Notably, this downbeat projection can be primarily attributed to the grounding of 737 Max aircraft.

The Boeing Company Price and EPS Surprise

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

Mixed Deliveries & Top-Line Expectation

Boeing’s first-quarter deliveries reflected a 19% year-over-year decline in commercial shipments. Meanwhile, defense shipments surged 140% from the year-ago figure.

Such increased defense deliveries must have provided a boost to the company’s revenue growth in the first quarter. Moreover, we may expect its service revenues to reflect solid numbers in the upcoming quarterly results. This is because Boeing’s global services business continues to expand its market-leading digital solution portfolio and customer base, more effectively post acquisition of KLX in the fourth quarter.

Boeing’s commercial aircraft business contributes almost 62% to its total revenues. Even if the defense and global services units accounting for only 39% deliver revenue growth, the overall top line would remain under pressure. For the first quarter, our consensus mark for the company’s total revenue is pegged at $23.2 billion, mirroring 1% dip year over year.

Cash Flow Might Slip

Lower deliveries of Boeing’s commercial business might hurt the company’s first-quarter cash flow. This is expected to get reflected in the company’s balance sheet in the quarter to be reported.

What the Zacks Model Unveils

Our proven model shows that Boeing is not likely to beat on earnings in first-quarter 2019. 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 -7.01% 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 Zacks 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 scheduled to report first-quarter 2019 results on Apr 25. The company has an Earnings ESP of +1.05% and a Zacks Rank #2.

Huntington Ingalls Industries, Inc. (HII - Free Report) is set to report first-quarter 2019 results on May 2. The company has an Earnings ESP of +4.63% and a Zacks Rank #3.

General Dynamics Corp. (GD - Free Report) is scheduled to report first-quarter 2019 results on Apr 24. The company has an Earnings ESP of +1.35% and a Zacks Rank #3.

Zacks' Top 10 Stocks for 2019

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