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Solid Commercial Deliveries to Boost Boeing (BA) Q2 Earnings

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The Boeing Company (BA - Free Report) is set to release second-quarter 2021 results on Jul 28, before the opening bell.

The company’s four-quarter average negative earnings surprise is 202.66%. Massive commercial deliveries might have offset the decline observed in defense segment, which in turn is expected to have boosted Boeing’s performance in the second quarter.

Solid Commercial Deliveries to Aid Results

Boeing’s second-quarter deliveries reflected a massive 295% surge in commercial shipments from the year-ago reported figure. Defense shipments, however, declined 2.3%.

For manufacturing companies like Boeing, successful deliveries of finished products play a crucial role in boosting revenue growth. Therefore, such a significant improvement witnessed in the jet maker’s commercial deliveries is expected to have offset the slight decline observed in the defense deliveries, thereby making us optimistic about Boeing’s overall second-quarter results.  

We expect the aforementioned delivery figures for Boeing’s commercial and defense segments to have contributed to the operational performance of the respective business units in the soon-to-be-reported quarter.

The Boeing Company Price and EPS Surprise

The Boeing Company Price and EPS Surprise

The Boeing Company price-eps-surprise | The Boeing Company Quote

Expectations for BGS

As far as Boeing Global Services (BGS) unit’s performance in the second quarter is concerned, we remain optimistic.  

The company started to witness positive signs in the resumption of domestic and international air travel since the first quarter, which in turn is expected to have boosted aftermarket commercial jet services in the second quarter of 2021. Improved commercial service volume is expected to have boosted BGS unit’s revenues in the yet-to-be-reported quarter.

Moreover, in the first quarter, the BGS unit recorded no notable asset impairments as opposed to pre-tax charges related to asset impairments it incurred in the past few quarters, courtesy of the COVID-19 pandemic. This might have benefited BGS unit’s operating margins, thereby favorably contributing to its bottom-line performance in the second quarter.

The Zacks Consensus Estimate for BGS unit’s revenues, pegged at $3,832 million, indicates an improvement of 10% from second-quarter 2020 revenues. The consensus mark for this segment’s earnings is pegged at $448 million, which indicates a notable improvement from loss of $672 million in second-quarter 2020.

Cash Flow Projections

Improving air travel statistics in recent times along with improvement on the 737 MAX program is expected to have resulted in inventory burndown associated with 737 and 787 programs during the second quarter of 2021. This in turn must have boosted Boeing’s operating cash flow in the soon-to-be-reported quarter. However, the timing of advanced payments and the burndown of access advanced payments along with 737 customer settlement payments and higher interest payments might have continued posing challenges to Boeing’s quarterly performance.

Q2 Expectations

The Zacks Consensus Estimate for total revenues is pegged at $17.59 billion, suggesting 49% improvement from the prior-year reported number. The consensus estimate for the bottom line is pegged at a loss of 54 cents per share, indicating an improvement from the year-ago quarter loss of $4.79.

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. This is not the case here, as stated below:

Boeing has an Earnings ESP of -14.74% and a Zacks Rank #3. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks to Consider

Here are a couple of defense companies you may want to consider, as these have the right combination of elements to post an earnings beat this season:

General Dynamics (GD - Free Report) has an Earnings ESP of +1.98% and a Zacks Rank #3.

Leidos Holdings (LDOS - Free Report) has an Earnings ESP of +4.46% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Lockheed Martin (LMT - Free Report) has an Earnings ESP of +0.92% and a Zacks Rank #3.