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Boeing (BA) Beats on Earnings in Q2, Hikes '18 Sales View

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The Boeing Company (BA - Free Report) reported adjusted earnings of $3.33 per share for second-quarter 2018, beating the Zacks Consensus Estimate of $3.24 by 2.8%. The bottom line reflected an improvement of 34% from $2.49 in the year-ago quarter.

Excluding one-time items, the aerospace giant reported GAAP earnings of $3.73 per share, up 30% from $2.87 per share in the year-ago quarter.

Revenues

The company's second-quarter revenues amounted to $24.26 billion in the quarter, surpassing the Zacks Consensus Estimate of $23.98 billion by 1.2%. The top line also improved 5% year over year, driven by improved revenues from all segments, except Boeing Capital.

The Boeing Company Price, Consensus and EPS Surprise

The Boeing Company Price, Consensus and EPS Surprise | The Boeing Company Quote

Total Backlog

Backlog at the end of second-quarter was up to $488 billion from $486.2 billion at the end of the first quarter. Reported backlog included $27 billion of net orders during the reported quarter.

Quarterly Segment Results

Commercial Airplane Segment: The segment witnessed a rise of 1% in revenues to $14.48 billion, on higher deliveries and mix. Operating margin for the quarter expanded 240 basis points (bps) year over year to 11.4%.

Boeing reported delivered 194 commercial planes during the quarter, up 6%.

A look at Boeing’s second-quarter order details reveals that the company booked 239 net commercial orders (accounting for cancellations). Backlog for this segment was valued at $416 billion.

Boeing Defense, Space & Security (BDS): The segment witnessed an approximate 9% year-over-year increase in second-quarter revenues to $5.59 billion, driven by F/A-18 and weapons volume. Operating margin for the quarter contracted 260 bps to 9.3%.

Backlog at BDS was $52 billion, 35% of which comprised orders from international clients.

Global Services: The segment observed improvement of 15% in revenues to $4.09 billion, reflecting growth across the portfolio. Operating margin for the quarter contracted 130 bps year over year to 14.7%, on account of product and services mix.

Boeing Capital Corporation (BCC): Boeing Capital reported quarterly revenues of $72 million in line with the year-ago quarter’s revenues. The segment’s earnings were $24 million compared with $25 million a year ago.

At the end of second-quarter, BCC's portfolio balance was $3 billion.

Financial Condition

Boeing exited the second quarter with cash and cash equivalents of $8.12 billion and short-term and other investments of $1.65 billion. At the end of first-quarter, the company had $9.24 billion of cash and cash equivalents and $0.66 billion of short-term and other investments. Long-term debt was $10.51 billion at the end of second quarter, up from $10.47 billion at first-quarter end.

Boeing generated $7.82 billion of operating cash flow at the end of second-quarter, up 10.9% year over year. Free cash flow was $4.30 billion at second-quarter 2018 end compared with free cash of $4.51 billion at the end of 2017’s second quarter.

Guidance

Boeing raised 2018 revenue guidance. The company currently expects 2018 revenues in the range of $97-$99 billion compared with the prior guidance of $96-$98 billion.

However, the company continues to expects adjusted or core earnings per share in the range of $14.30-$4.50. GAAP earnings are still projected in the range of $16.40-$16.60.

Commercial Airplanes' 2018 delivery expectations are reiterated in the band of 810 to 815 with revenues still projected in the range of $59.5-$60.5 billion. However, operating margin is now anticipated to be more than 11.5%, compared with earlier expectation of around 11.5%.

The company currently expects 2018 defense revenues in the range of $22-$23 billion, compared with the prior range of $21.5-$22.5 billion. Operating margin is now anticipated in the range of 10-10.5% compared with prior guidance of approximately 11%.

Boeing Capital expects the aircraft finance portfolio to remain stable. The company still anticipates segment revenues to be approximately $0.2 billion.

Boeing's 2018 R&D is still forecasted to be approximately $3.7 billion. Capital expenditures for 2018 is also expected to remain approximately $2.2 billion.

Zacks Rank

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

Recent Defense Releases

Lockheed Martin (LMT - Free Report) reported second-quarter 2018 adjusted earnings of $4.31 per share, beating the Zacks Consensus Estimate of $3.89 by 10.8%.

Textron (TXT - Free Report) reported second-quarter 2018 earnings from continuing operations of 87 cents per share, which surpassed the Zacks Consensus Estimate of 70 cents by 24.3%.

AAR Corp. (AIR - Free Report) reported fourth-quarter fiscal 2018 adjusted earnings of 54 cents per share, which outpaced the Zacks Consensus Estimate of 52 cents by 3.9%.

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