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Boeing (BA) Q3 Earnings Surpass Estimates, '18 EPS View Up

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The Boeing Company BA reported adjusted earnings of $3.58 per share for third-quarter 2018, beating the Zacks Consensus Estimate of $3.45 by 3.8%. The bottom line reflected an improvement of 36.6% from $2.62 in the year-ago quarter.

Excluding one-time items, the aerospace giant reported GAAP earnings of $4.07 per share, up 36.1% from $2.99 per share in the year-ago quarter.

Revenues

The company's third-quarter revenues amounted to $25.15 billion in the quarter, surpassing the Zacks Consensus Estimate of $23.72 billion by 6%. The top line also improved 4% year over year, driven by increased revenues from all segments, except Commercial Airplane.

Total Backlog

Backlog at the end of third quarter increased to $491.2 billion from $488 billion at the end of the second quarter. Reported backlog included $28 billion of net orders during the quarter under review.

The Boeing Company Price, Consensus and EPS Surprise

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

Quarterly Segment Results

Commercial Airplane Segment: Revenues at this segment slipped 1% to $15.28 billion on lower deliveries. Operating margin for the quarter expanded 340 basis points (bps) year over year to 13.2%.

Boeing delivered 190 commercial planes during the quarter under review, down 6%.

A look at Boeing’s third-quarter order details reveals that the company booked 171 net commercial orders (accounting for cancellations). Backlog for this segment was valued at $413 billion.

Boeing Defense, Space & Security (BDS): The segment witnessed a 13% year-over-year improvement in third-quarter revenues to $5.73 billion, driven by increased sales volume across government satellites, KC-46 Tanker, F/A-18 and weapons. However, this unit incurred operating loss of $245 million against operating earnings of $486 million in the year-ago quarter.

Backlog at BDS was $58 billion, 31% of which comprised orders from international clients.

Global Services: Revenues at this segment improved 14% to $4.09 billion, backed by higher parts volume. Operating margin for the quarter contracted 50 bps year over year to 13.3% on account of higher period costs.

Boeing Capital Corporation (BCC): Boeing Capital reported quarterly revenues of $77 million compared with $70 million in the year-ago quarter. The segment’s operating earnings were $27 million compared with $23 million a year ago.

At the end of third-quarter 2018, BCC's portfolio balance was $3.1 billion.

Financial Condition

Boeing exited the third quarter with cash and cash equivalents of $8.03 billion, and short-term and other investments of $1.96 billion. At the end of 2017, the company had $8.81 billion of cash and cash equivalents, and $1.18 billion of short-term and other investments. Long-term debt was $10.49 billion at the end of third quarter, up from $9.78 billion at 2017-end.

Boeing generated $12.38 billion of operating cash flow at the end of the third quarter, up 18.5% year over year. Free cash flow was $4.10 billion at third-quarter 2018 end compared with free cash of $3 billion at the end of 2017’s third quarter.

Guidance

Boeing raised 2018 revenue and earnings guidance. Currently, it expects 2018 revenues in the range of $98-$100 billion compared with $97-$99 billion projected earlier.

Moreover, the company expects adjusted or core earnings per share in the range of $14.90-$15.10 compared with $14.30-$4.50 anticipated earlier. GAAP earnings are now projected in the range of $16.90-$17.10, up from earlier band of $16.40-$16.60.

Commercial Airplanes' 2018 delivery expectations are reiterated in the band of 810-815, with revenues still projected in the range of $59.5-$60.5 billion. However, operating margin is now anticipated to be in the range of 12-12.5%, more than earlier expectation to generate margin of greater than 11.5%.

The company currently expects 2018 defense revenues in the range of $22.5-$23 billion, compared with earlier range of $22-$23 billion. Operating margin is now anticipated to be more than 6.5% compared with prior range of 10-10.5%.

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 projected to be approximately $3.5 billion compared with $3.7 billion forecasted previously. Capital expenditures for 2018 are now expected to remain approximately $2 billion compared with $2.2 billion anticipated earlier.

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 Corp. (LMT - Free Report) reported third-quarter 2018 earnings of $5.14 per share, beating the Zacks Consensus Estimate of $4.32 by 19%. The bottom line also improved 54.8% from the year-ago quarter’s figure of $3.32.

Textron Inc. TXT reported third-quarter 2018 adjusted earnings from continuing operations of 61 cents per share, which missed the Zacks Consensus Estimate of 76 cents by 19.7%. The bottom line also decreased 6.2% from 65 cents in the year-ago quarter.

Hexcel Corporation HXL reported third-quarter 2018 adjusted earnings of 80 cents per share, which was in line with the Zacks Consensus Estimate. The bottom line improved 12.7% from the prior-year quarter’s figure of 71 cents.

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