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Boeing (BA) Beats on Q3 Earnings & Revenues, Lifts View

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Aerospace giant The Boeing Company (BA - Free Report) reported adjusted earnings of $3.51 per share for third-quarter 2016, beating the Zacks Consensus Estimate of $2.62 by a wide 34%. Reported earnings were also up 39.3% from the year-ago figure of $2.52.

The quarterly number reflects solid overall execution of production programs and services, favorable tax items (98 cents) and timing of aircraft deliveries.

On a GAAP basis, Boeing reported earnings of $3.60 per share, compared to earnings of $2.47 per share in the year-ago quarter.
 

Revenues

The company's revenues amounted to $23.90 billion in the reported quarter, beating the Zacks Consensus Estimate of $23.46 billion by 1.8%. The reported figure, however, declined 7.5% year over year.

Total Backlog

Backlog at the end of the third quarter was down to $462.0 billion from $489.3 billion at 2015 end. Reported backlog included $15 billion of net orders during the quarter.

Quarterly Segment Results

Commercial Airplane Segment: The segment saw a 4.1% decline in revenues to $16.97 billion on lower planned delivery volumes. Operating margin contracted 60 basis points (bps) year over year to 9.4%, reflecting delivery volume and mix, partially offset by lower period costs.

Boeing’s commercial airplane deliveries decreased 5.5% to 188 in the third quarter due to low demand for the 737, 777 and 787 Dreamliners. Sequentially, deliveries registered a 5.5% drop. Deliveries of the single-aisle 737 slipped to 120 in the third quarter from 126 a year ago, as the company was busy with the production of a newer version of its most popular plane, the 737 MAX.

Shipments of the 777 and 787 Dreamliners were 22 and 36, compared with 27 and 37 in the year-ago period, respectively. For the 747 and 767 jets, the company clocked deliveries of 5 each, compared with 4 units of 747 and 5 units of 767 in the year-ago quarter.

Boeing won net orders for 107 planes during the quarter, with its backlog reaching 5,600 worth a total $409 billion.

Boeing Defense, Space & Security (BDS): The segment witnessed an approximate 10.1% year-over-year decrease in quarterly revenues to $7.51 billion. Revenues at two of the three sub-segments – Boeing Military Aircraft (BMA) and Network & Space Systems (N&SS) – recorded year-over-year deterioration of 19.2% and 20%, respectively. Global Services & Support (GS&S) witnessed 16.5% year-over-year growth in revenues.

Quarterly operating margin contracted 180 bps to 10.4%.

Backlog at BDS was $53 billion, 38% of which comprised orders from international clients.

In the defense and space business, Boeing’s deliveries totaled 50 in the third quarter of 2016, up from 48 a year ago and 45 in the preceding quarter. Total deliveries consisted of 19 AH-64 Apache helicopters (both new and remanufactured) and 14 Chinook helicopters (new and renewed). The company also delivered 6 F/A-18 jets, 4 P-8 models, 4 F-15s, 1 Military Satellite, and 2 Commercial and Civil Satellites.

Boeing Capital Corporation (BCC): Boeing Capital reported quarterly revenues of $63 million, compared with $114 million in the year-ago quarter. The segment’s earnings were $13 million compared with $10 million a year ago.

At the end of the third quarter, BCC's portfolio balance was $3.7 billion, up from the beginning of the quarter.

BOEING CO Price, Consensus and EPS Surprise

 

BOEING CO Price, Consensus and EPS Surprise | BOEING CO Quote

Financial Condition

Boeing exited the third quarter with cash and cash equivalents of $8.99 billion and short-term investments of $682 million. At year-end 2015, the company had $11.30 billion of cash and cash equivalents and $750 million of short-term investments. Long-term debt was $9.82 billion in the third quarter, up from $8.73 billion at 2015 end.

Boeing generated $3.20 billion of operating cash flow in the quarter, up 12% year over year. Free cash flow was $2.61 billion in the quarter compared with free cash of $2.30 billion a year back.

Guidance

Boeing raised its adjusted or core earnings per share expectation for 2016 to the range of $6.80–$7.00 from $6.10–$6.30 expected earlier. GAAP earnings are now expected in the range of $7.10–$7.30 per share, compared with $6.40–$6.60 projected earlier.

The company also raised its 2016 revenue guidance to the range of $93.5−$95.5 billion from the prior guidance of $93−$95 billion.

Commercial Airplanes' 2016 delivery expectations are in the band of 745−750 airplanes with revenues projected in the $64.5−$65.5 billion range, compared to the previous expectation of 740−745 airplanes with revenues in the $64.0−$65.0 billion band. Operating margin is still expected in the 4.5–5.0% range.

The company maintained 2016 defense revenues guidance in the $28.5–$29.5 billion range with operating margin of approximately 10%.

Boeing Capital Corp. expects the aircraft finance portfolio to remain stable. The company reiterated its segment revenue expectation of approximately $0.3 billion.

Boeing's 2016 R&D forecast has been maintained at approximately $4.8 billion. Capital expenditures for 2016 are still expected to be $2.8 billion.

Zacks Rank

Boeing currently holds a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

At Its Peers

Pentagon’s prime contractor, Lockheed Martin Corp. (LMT - Free Report) reported third-quarter 2016 earnings of $3.61 per share, surpassing the Zacks Consensus Estimate of $2.86 by 26.2%. Earnings also increased 49.2% from the year-ago level, courtesy of strong revenue and operating margin growth.

Northrop Grumman Corporation (NOC - Free Report) reported third-quarter 2016 adjusted earnings of $3.35 per share, beating the Zacks Consensus Estimate of $2.81 by 19.2%. Reported earnings were also up 22% from $2.75 recorded in the year-ago quarter.

General Dynamics Corporation (GD - Free Report) announced third-quarter 2016 earnings from continuing operations of $2.48 per share, beating the Zacks Consensus Estimate of $2.37 by 4.6%. Reported earnings were also up 8.8% from $2.28 recorded in the year-ago quarter.

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