It has been about a month since the last earnings report for Boeing (BA - Free Report) . Shares have added about 6.4% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Boeing due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Boeing Q3 Earnings Miss, Down Y/Y on Lower 737 Deliveries
Boeing reported adjusted earnings of $1.45 per share for third-quarter 2019, which missed the Zacks Consensus Estimate of $2.04 by 28.9%. The bottom line declined 59% from the year-ago quarter’s earnings of $3.58. This year-over-year downside was primarily due to lower 737 deliveries.
Excluding one-time items, the company’s GAAP earnings came in at $2.05 per share compared with $4.07 in the third quarter of 2018.
In the quarter under review, Boeing’s revenues amounted to $19.98 billion, which surpassed the Zacks Consensus Estimate of $19.34 billion by 3.3%. The top line however plunged 21% from the year-ago quarter’s figure of $25.15 billion. This decline was primarily due to lower 737 deliveries and higher defense and services volume.
Backlog at the end of third-quarter 2019 slipped to $470 billion from $474 billion at the end of second-quarter 2019.
Commercial Airplane: Revenues at this segment slumped 41% to $8.25 billion on account of lower 737 deliveries. The segment incurred operating expenses of $0.04 billion against operating income of $2 billion in the year-ago quarter.
Boeing delivered 62 commercial planes during the quarter under review, down 67%.
Backlog for this segment remains healthy with over 5,500 airplanes valued at $387 billion.
Boeing Defense, Space & Security (BDS): This segment witnessed a 2% year-over-year rise in revenues to $7.04 billion in the third quarter. The uptick was driven by higher volume from satellites, weapons and T-7A Red Hawk programs. Meanwhile, the segment recorded operating earnings worth $755 million against operating loss of $247 million in the year-ago quarter.
Backlog at BDS was $62 billion, 30% of which comprised orders from international clients.
Global Services: Revenues at this segment improved 14% to $4.66 billion backed by higher volume for government services and the acquisition of KLX Aerospace. Moreover, operating margin expanded 10 bps year over year to 14.4%.
Boeing Capital Corporation (BCC): This segment reported quarterly revenues of $66 million compared with $77 million registered in the year-ago quarter. Operating earnings totaled $29 million, up from $27 million registered in the year-ago quarter.
At the end of third-quarter 2019, BCC's portfolio balance was $2.2 billion.
Boeing exited the third quarter with cash and cash equivalents of $9.76 billion and short-term and other investments of $1.15 billion. At the end of 2018, the company had $7.64 billion of cash and cash equivalents and $0.93 billion of short-term and other investments. Long-term debt amounted to $20.30 billion at the end of the reported quarter, up from $10.66 billion at 2018 end.
Boeing generated $0.26 billion of operating cash outflow at the end of the third quarter, compared to cash inflow of $12.38 billion at the end of third quarter of 2018. Free cash outflow totaled $2.89 billion at third-quarter 2019 end against cash inflow with $4.10 billion at the end of third-quarter 2018.
During the quarter, the company paid out $1.2 billion of dividends, reflecting a 20% increase from the third quarter of 2018.
Due to the uncertainty regarding the timing and conditions related to 737 MAX fleet’s return to service, Boeing has once again refrained from issuing its guidance for now.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month. The consensus estimate has shifted -40.63% due to these changes.
At this time, Boeing has a poor Growth Score of F, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Boeing has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.