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Lower Defense Deliveries to Hurt Boeing (BA) in Q3 Earnings

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The Boeing Company’s (BA - Free Report) Defense, Space & Security (BDS) segment is likely to have recorded dismal third-quarter 2022 revenues, thanks to lower deliveries of the company’s defense products. Supply chain constraints might have had weighed on the unit’s quarterly bottom-line performance.  

Boeing’s third-quarter 2022 results are scheduled to be released on Oct 26.

Click here to know how the company’s overall Q3 performance is expected to have been.

Steady Order Flow to Aid Backlog

With the U.S. administration spending significantly on the nation’s defense for the past couple of years, Boeing’s defense and space unit has been witnessing solid order flow from the Pentagon, NASA and Congress for its varied products. This, in turn, has been consistently boosting the BDS unit’s backlogs.

The Boeing Company Price and EPS Surprise

The Boeing Company Price and EPS Surprise

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

Amid the uncertainties caused by the COVID-19 pandemic, the defense market has been relatively stable. Boeing has been witnessing solid, global demand for its major combat programs, which translated into an overall order value of $2 billion for the BDS unit in the second quarter of 2022. We expect the upcoming results to reflect a similar order count in terms of a solid backlog figure for the BDS unit.

Poor Deliveries Hurt Q3 Performance

Boeing’s third-quarter 2022 defense delivery figures reflected a decline of 2.7% from the year-ago period.

In the quarter, its defense deliveries totaled 36, down from 37 in the year-ago period. Such poor delivery figures are expected to have hurt the defense segment’s revenues in the soon-to-be-reported quarter.

Notably, the Zacks Consensus Estimate for the company’s defense unit revenues, pegged at $6,552 million, indicates a decline of 1% from the year-ago quarter’s reported figure.

Earnings Prospects

Along with lower delivery volumes for its defense products, charges on fixed-price development programs, in particular MQ-25, and commercial crew might have had an adverse impact on the segment’s overall operating performance. This in turn might have hurt its quarterly earnings.

Further, supply chain constraints and inflation impacts are projected to have hurt third-quarter earnings of the BDS unit.

Notably, the Zacks Consensus Estimate for the company’s defense unit earnings, pegged at $372 million, indicates a significant decline of 14.7% from the year-ago quarter’s reported figure.

What the Zacks Model Unveils

According to the Zacks model, the combination of two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better — increases the odds of an earnings surprise.

Boeing has an Earnings ESP of -1,900% 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 some defense companies you may want to consider as these have the right combination of elements to post an earnings beat in their upcoming releases:

Spirit AeroSystems (SPR - Free Report) : It is scheduled to release its third-quarter results on Nov 3. SPR has an Earnings ESP of +47.19% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

SPR delivered a four-quarter average negative earnings surprise of 100.31%. The Zacks Consensus Estimate for Spirit AeroSystem’s third-quarter bottom line is pegged at a loss of 39 cents, which implies a solid improvement from a loss of $1.13 incurred in the third quarter of 2021.

Huntington Ingalls Industries (HII - Free Report) : It is slated to release its third-quarter results on Nov 3. HII has an Earnings ESP of +0.35% and a Zacks Rank #3.

HII delivered a four-quarter average earnings surprise of 12.38%. The Zacks Consensus Estimate for Huntington’s third-quarter earnings, pegged at $3.53, suggests a decline of 3.3% from the third quarter of 2021.

An Upcoming Defense Earnings

Spire (SPIR - Free Report) is slated to report its third-quarter results on Nov 9. It holds a Zacks Rank #2 (Buy).

The Zacks Consensus Estimate for SPIR’s third-quarter earnings, pegged at a loss of 10 cents, has remained unchanged over the past seven days. SPIR boasts a long-term earnings growth rate of 7.9%.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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