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Will Aerospace ETF ITA Bounce Back on Boeing Strength?
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The Aerospace and defense investing has been subdued this year in comparison to the S&P 500. The best-performing ETF SPDR S&P Aerospace & Defense ETF (XAR - Free Report) has added 11.2% so far this year, underperforming the S&P 500 (up 18.8% as of Jul 26).
Meanwhile, iShares U.S. Aerospace & Defense ETF (ITA - Free Report) is up only 3% this year and 0.8% past month, mainly due to its huge exposure to struggling Boeing (BA - Free Report) . The aerospace giant Boeing has about 17% exposure to ITA, which led the fund to underperform in the defense pack.
Inside Boeing’s Earnings
On Jul 26, 2023, Boeing released its second-quarter earnings report, and the results were met with positive market response. The company announced better-than-expected revenue and a narrower loss. Boeing reported top-line revenue of $19.75 billion for the second quarter (up 18% year over year), surpassing the Zacks Consensus Estimate of $18.46 billion.
Furthermore, the company's adjusted loss per share was reported at $0.82, narrower than the Zacks Consensus Estimate of $0.99 loss. The results were driven by higher commercial volume and improved deliveries.
Positive Cash Flow and Operational Performance
In addition to revenue growth, Boeing demonstrated solid cash flow generation. Operating cash flow for the quarter amounted to $2.875 billion, and free cash flow stood at $2.579 billion. This is a notable turnaround from the negative free cash flow reported in the same quarter the previous year, which was $182 million. The positive cash flow indicates better management of financial resources and increased revenue from new orders and deliveries.
CEO's Optimistic Remarks
Dave Calhoun, Boeing's CEO and President, expressed his optimism about the company's performance, as quoted on Yahoo. He highlighted the improved deliveries and strong free cash flow generation, which has positioned Boeing well to achieve its operational and financial goals for the current year and the long term. The steady increase in production rates and investments in crucial programs, products, and technologies further reinforce Boeing's growth strategy.
Guidance for 737 Max and 787 Dreamliner
Boeing reaffirmed its prior guidance for the 737 Max, expecting 400-450 deliveries this year with a planned production rate of 38 planes per month. The company aims to reach a production rate of 50 planes per month by 2026. Despite a setback in mid-April related to the 737 Max production, Boeing remains confident in meeting its targets.
Regarding the 787 Dreamliner, Boeing increased production to four planes per month, with plans to ramp up to five per month by year-end. The long-term goal is to achieve a production rate of 10 Dreamliners per month by 2026, with an estimated 70-80 787 jets to be produced this year.
Strong Order Book
Boeing's impressive Q2 performance was further bolstered by a surge in new orders. Last month, the company secured orders for 288 new planes, with a significant contribution from Air India, which placed orders for 190 MAX jets, 20 Dreamliners, and 10 777X planes. Additionally, Boeing confirmed a previously announced order for 39 Dreamliners from Riyadh Air, a new Saudi Arabian airline. These orders bode well for the company's future revenue stream.
Zacks Rank
Boeing has a Zacks Rank #3 (Hold). The stock has a moderate Value score of “C.” The Aerospace & Defense industry currently carries a Zacks Industry Rank #40%, which places it in the top 40% of more than 250 Zacks industries.
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Will Aerospace ETF ITA Bounce Back on Boeing Strength?
The Aerospace and defense investing has been subdued this year in comparison to the S&P 500. The best-performing ETF SPDR S&P Aerospace & Defense ETF (XAR - Free Report) has added 11.2% so far this year, underperforming the S&P 500 (up 18.8% as of Jul 26).
Meanwhile, iShares U.S. Aerospace & Defense ETF (ITA - Free Report) is up only 3% this year and 0.8% past month, mainly due to its huge exposure to struggling Boeing (BA - Free Report) . The aerospace giant Boeing has about 17% exposure to ITA, which led the fund to underperform in the defense pack.
Inside Boeing’s Earnings
On Jul 26, 2023, Boeing released its second-quarter earnings report, and the results were met with positive market response. The company announced better-than-expected revenue and a narrower loss. Boeing reported top-line revenue of $19.75 billion for the second quarter (up 18% year over year), surpassing the Zacks Consensus Estimate of $18.46 billion.
Furthermore, the company's adjusted loss per share was reported at $0.82, narrower than the Zacks Consensus Estimate of $0.99 loss. The results were driven by higher commercial volume and improved deliveries.
Positive Cash Flow and Operational Performance
In addition to revenue growth, Boeing demonstrated solid cash flow generation. Operating cash flow for the quarter amounted to $2.875 billion, and free cash flow stood at $2.579 billion. This is a notable turnaround from the negative free cash flow reported in the same quarter the previous year, which was $182 million. The positive cash flow indicates better management of financial resources and increased revenue from new orders and deliveries.
CEO's Optimistic Remarks
Dave Calhoun, Boeing's CEO and President, expressed his optimism about the company's performance, as quoted on Yahoo. He highlighted the improved deliveries and strong free cash flow generation, which has positioned Boeing well to achieve its operational and financial goals for the current year and the long term. The steady increase in production rates and investments in crucial programs, products, and technologies further reinforce Boeing's growth strategy.
Guidance for 737 Max and 787 Dreamliner
Boeing reaffirmed its prior guidance for the 737 Max, expecting 400-450 deliveries this year with a planned production rate of 38 planes per month. The company aims to reach a production rate of 50 planes per month by 2026. Despite a setback in mid-April related to the 737 Max production, Boeing remains confident in meeting its targets.
Regarding the 787 Dreamliner, Boeing increased production to four planes per month, with plans to ramp up to five per month by year-end. The long-term goal is to achieve a production rate of 10 Dreamliners per month by 2026, with an estimated 70-80 787 jets to be produced this year.
Strong Order Book
Boeing's impressive Q2 performance was further bolstered by a surge in new orders. Last month, the company secured orders for 288 new planes, with a significant contribution from Air India, which placed orders for 190 MAX jets, 20 Dreamliners, and 10 777X planes. Additionally, Boeing confirmed a previously announced order for 39 Dreamliners from Riyadh Air, a new Saudi Arabian airline. These orders bode well for the company's future revenue stream.
Zacks Rank
Boeing has a Zacks Rank #3 (Hold). The stock has a moderate Value score of “C.” The Aerospace & Defense industry currently carries a Zacks Industry Rank #40%, which places it in the top 40% of more than 250 Zacks industries.