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Escalated Expenses to Weigh on Boeing's (BA) Q2 Earnings
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The Boeing Company (BA - Free Report) is set to release second-quarter 2020 results on Jul 29, before the opening bell.
Lower commercial service volume along with reduced deliveries is expected to have weighed on Boeing’s quarterly results.
Let's take a detailed look at the factors likely to have influenced Boeing’s performance in the first quarter.
Will Deliveries Aid Q2 Results?
Boeing’s second-quarter deliveries reflected a massive 77.8% year-over-year plunge in commercial shipments. However, its defense deliveries improved 18.9% in the soon-to-be-reported quarter.
Now considering the fact that the jet maker’s commercial segment contributes 42% to its total revenues while the defense unit contributes 34.3%, the improvement in defense deliveries is not sufficient enough to outweigh the commercial delivery deficiency. Hence, the second-quarter delivery numbers do not raise hopes of solid operational results this time around. The Zacks Consensus Estimate for Boeing’s revenues as well as earnings indicates year-over-year decline.
Boeing started low rate production of its 737 jets toward the end of May 2020. However, the loss that the company has incurred in relation to the grounding and subsequent temporary production suspension of this program is huge. The deliveries of this family of jets remained poor in the second quarter. The company has approximately 450 737 MAX aircraft built and stored. No doubt storage and maintenance cost of these undelivered jets have pushed up Boeing’s quarterly expenses, thereby impacting its earnings in the second quarter.
Moreover, lower delivery payments due to fewer 737 deliveries combined with costs for building and storing completed 737 aircraft are expected to have weighed on Boeing’s operating cash in the to-be-reported quarter. We expect the company’s balance sheet to duly reflect a poor cash flow figure.
Poor Segmental Performance
Courtesy of the novel coronavirus outbreak and its deadly impact, worldwide travel restrictions have brought air travel to almost nil. Consequently, commercial aerospace has been bearing the brunt, which, in turn, is hampering aftermarket commercial jet services. Low commercial service volume is expected to have weighed on Boeing Global Services (BGS) unit’s performance in the second quarter.
In fact, all the major business segments of Boeing are likely to have performed dismally, except perhaps the defense unit that is largely protected by the government. Particularly, the prolonged 737 Max grounding since March 2019 and the subsequent halt in production of this program are likely to have taken a toll on the jet maker’s overall quarterly performance.
Due to the COVID-19 crisis, Boeing’s operations were halted, including a shutdown of its commercial airplane production for a few weeks, as stated by Greg Smith, Boeing’s executive vice president of Enterprise Operations, chief financial officer and interim leader of Communications. Moreover, as air traffic slowed sharply due to the prolonged pandemic impacts, new aircraft that were supposed to get delivered are now lying idle at Boeing's manufacturing plants. The aircraft giant’s second-quarter results will therefore reflect poor numbers.
Q2 Expectations
Notably, the Zacks Consensus Estimate for total revenues is pegged at $12.61 billion, suggesting 20% decline from the prior-year reported number. The consensus estimate for Boeing’s second-quarter earnings is pegged at $2.93 per share, indicating a massive 200.3% decline from the year-ago quarter reported figure.
What the Zacks Model Unveils
Our proven model does not conclusively predict an earnings beat for Boeing this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. 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 -4.82% and a Zacks Rank #4 (Sell).
Here are some defense companies you may want to consider as these have the right combination of elements to post an earnings beat this time around:
Curtiss-Wright Corp. (CW - Free Report) has an Earnings ESP of +13.62% and a Zacks Rank #3.
Leidos Holdings, Inc. (LDOS - Free Report) has an Earnings ESP of +0.11% and a Zacks Rank #3.
A Recent Defense Release
Lockheed Martin (LMT - Free Report) reported second-quarter 2020 adjusted earnings of $6.13 per share, which surpassed the Zacks Consensus Estimate of $5.71 by 7.4%.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
Image: Bigstock
Escalated Expenses to Weigh on Boeing's (BA) Q2 Earnings
The Boeing Company (BA - Free Report) is set to release second-quarter 2020 results on Jul 29, before the opening bell.
Lower commercial service volume along with reduced deliveries is expected to have weighed on Boeing’s quarterly results.
Let's take a detailed look at the factors likely to have influenced Boeing’s performance in the first quarter.
Will Deliveries Aid Q2 Results?
Boeing’s second-quarter deliveries reflected a massive 77.8% year-over-year plunge in commercial shipments. However, its defense deliveries improved 18.9% in the soon-to-be-reported quarter.
Now considering the fact that the jet maker’s commercial segment contributes 42% to its total revenues while the defense unit contributes 34.3%, the improvement in defense deliveries is not sufficient enough to outweigh the commercial delivery deficiency. Hence, the second-quarter delivery numbers do not raise hopes of solid operational results this time around. The Zacks Consensus Estimate for Boeing’s revenues as well as earnings indicates year-over-year decline.
The Boeing Company Price and EPS Surprise
The Boeing Company price-eps-surprise | The Boeing Company Quote
737 Max Remains a Growth Inhibitor
Boeing started low rate production of its 737 jets toward the end of May 2020. However, the loss that the company has incurred in relation to the grounding and subsequent temporary production suspension of this program is huge. The deliveries of this family of jets remained poor in the second quarter. The company has approximately 450 737 MAX aircraft built and stored. No doubt storage and maintenance cost of these undelivered jets have pushed up Boeing’s quarterly expenses, thereby impacting its earnings in the second quarter.
Moreover, lower delivery payments due to fewer 737 deliveries combined with costs for building and storing completed 737 aircraft are expected to have weighed on Boeing’s operating cash in the to-be-reported quarter. We expect the company’s balance sheet to duly reflect a poor cash flow figure.
Poor Segmental Performance
Courtesy of the novel coronavirus outbreak and its deadly impact, worldwide travel restrictions have brought air travel to almost nil. Consequently, commercial aerospace has been bearing the brunt, which, in turn, is hampering aftermarket commercial jet services. Low commercial service volume is expected to have weighed on Boeing Global Services (BGS) unit’s performance in the second quarter.
In fact, all the major business segments of Boeing are likely to have performed dismally, except perhaps the defense unit that is largely protected by the government. Particularly, the prolonged 737 Max grounding since March 2019 and the subsequent halt in production of this program are likely to have taken a toll on the jet maker’s overall quarterly performance.
Due to the COVID-19 crisis, Boeing’s operations were halted, including a shutdown of its commercial airplane production for a few weeks, as stated by Greg Smith, Boeing’s executive vice president of Enterprise Operations, chief financial officer and interim leader of Communications. Moreover, as air traffic slowed sharply due to the prolonged pandemic impacts, new aircraft that were supposed to get delivered are now lying idle at Boeing's manufacturing plants. The aircraft giant’s second-quarter results will therefore reflect poor numbers.
Q2 Expectations
Notably, the Zacks Consensus Estimate for total revenues is pegged at $12.61 billion, suggesting 20% decline from the prior-year reported number. The consensus estimate for Boeing’s second-quarter earnings is pegged at $2.93 per share, indicating a massive 200.3% decline from the year-ago quarter reported figure.
What the Zacks Model Unveils
Our proven model does not conclusively predict an earnings beat for Boeing this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. 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 -4.82% and a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank stocks here.
Stocks to Consider
Here are some defense companies you may want to consider as these have the right combination of elements to post an earnings beat this time around:
Curtiss-Wright Corp. (CW - Free Report) has an Earnings ESP of +13.62% and a Zacks Rank #3.
Leidos Holdings, Inc. (LDOS - Free Report) has an Earnings ESP of +0.11% and a Zacks Rank #3.
A Recent Defense Release
Lockheed Martin (LMT - Free Report) reported second-quarter 2020 adjusted earnings of $6.13 per share, which surpassed the Zacks Consensus Estimate of $5.71 by 7.4%.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>