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Boeing Beats EPS, Misses Revenue

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The Boeing Company (BA - Free Report) repeated its strong core performance of the previous quarter. The defense major registered earnings per share of $1.35 which surpassed the Zacks Consensus Estimate of $1.12.

The strong performance of the company stemmed from another solid quarter at its commercial segment, which registered 17% growth in commercial airplane deliveries in the period.

Total Revenue

Total revenue grew 13% year over year to $20 billion. The top line marginally missed the Zacks Consensus Estimate of $20.1 billion.

Segment Results

Commercial Airplanes

Boeing’s Commercial Airplane segment saw a 17% rise in deliveries to 149 units in the reported quarter. As a result, Commercial Airplanes revenue increased by 28% to $12.2 billion on higher delivery volume.

In the reported quarter, the company delivered 102 units of 737 series and 20 units of 777 series airplanes versus deliveries of 100 and 21, respectively in the year-ago period. The company also delivered 7 units of 767 (5 in the year-ago period), 8 units of 747 and 12 units of 787. In the year-ago period, no 747 and 1 unit of 787 airplanes was delivered.

Operating margin fell 190 basis points to 9.5%, reflecting higher period costs and the dilutive impact of 787 and 747-8 deliveries. This was partially offset by the higher deliveries and lower research & development (R&D) expenditure.

Commercial Airplanes booked 369 net orders during the reported quarter.  Backlog at the end of the reported period remains strong with approximately 4,100 airplanes valued at a record $307 billion.

Boeing Defense, Space & Security

The Boeing Defense, Space & Security segment witnessed a 4% decline in its quarterly revenue to $7.84 billion. Among its sub-segments Boeing Military Aircraft (“BMA”) and Network & Space Systems (“N&SS”) witnessed a top-line dip of 4% and 12%, respectively.

Quarterly operating margin grew by 50 basis points to 10.5%.  The operating margin of this segment was driven by Boeing Military Aircraft’s strong performance across various programs. While softness in the performance from N&SS and Global Services & Support (“GS&S”) impacted results.

Backlog at Defense, Space & Security segment remained at $71 billion, keeping the backlog to more than two times the unit's projected 2012 revenue.

Boeing Capital Corporation (BCC)

Boeing Capital Corporation reported quarterly revenues of $101 million compared with $126 million in the year-ago quarter. The segment registered earnings of $33 million compared with earnings of $19 million in the year-ago period. At quarter-end, BCC's portfolio balance remained unaltered at $4.1 billion.

Operating Statistics

Total costs and expenses of the company during the reported quarter were $49.60 billion, up 25.2%, mainly due to the increase in the cost of products sold. Despite the rise in cost, total revenue growth helped Boeing to register a 10.2% increase in earnings from operation to reach $9.8 billion.

Financial Condition

Boeing’s cash and cash equivalents as on September 30, 2012 were $6.6 billion and short-term investments of $4.6 billion. Cash and cash equivalents as on December 31, 2011 were $10.05 billion versus and short-term investments of $1.22 billion.

In the first nine months of the year, the company generated $3.34 billion of cash from operations compared with $1.09 billion generated in the year-ago period. Long-term debt in the aforesaid period decreased to $9.01 billion from $10.0 billion at the end of 2011.


Taking into account its performance in the first nine months of 2012, Boeing raised its full year 2012 earnings per share guidance to a range of $4.80–$4.95 from its earlier guidance range of $4.40–$4.60. The company also raised its revenue guidance for 2012 to the range of $80.5 billion – $82 billion versus the earlier range of $79.5 billion–$81.5 billion.

The company maintained its Commercial Airplanes' 2012 deliveries for 2012 between 585 and 600 airplanes, which are already sold out. This includes an expected 70 to 85 787 and 747-8 deliveries. Commercial Airplanes' 2012 revenue is expected to be between $47.5 billion and $49.5 billion with operating margin hovering around 9.0%.

In the defense space, the company expects defense revenue for 2012 to be between $32.5 billion and $33.0 billion versus its earlier range of $31.5 billion and $32.0 billion with operating margin greater than 9%. Boeing Capital Corporation expects that its aircraft finance portfolio will continue to decline in 2012.

Boeing's 2012 R&D expenditure forecast is between $3.3 billion and $3.5 billion. Capital expenditures for 2012 are expected to be approximately $1.8 billion, down from $2.0 billion.

Peer Comparison

Lockheed Martin Corporation (LMT - Free Report) , one of Boeing’s peers, reported third quarter financial results today. On the revenue front, Lockheed Martin reported quarterly net sales of $11.9 billion, beating the Zacks Consensus Estimate of $11.1 billion by $698 million. However, the figure fell below the year-ago quarterly revenue of $12.1 billion.

Lockheed reported third-quarter 2012 earnings of $2.26 per share, beating the Zacks Consensus Estimate of $1.85. This was also higher than the year-ago quarterly earnings of $2.06 per share.

Our Take

Boeing once again registered a solid performance this quarter. The most laudable part of this success story is its consistent growth in workforce and backlog over the last nine months. Boeing’s upward revision in the guidance suggests that this positive trend will continue to last through 2012.

Boeing Co. retains a short-term Zacks #3 Rank (Hold rating). We have a long-term Neutral recommendation on the stock.

Chicago-based, Boeing is a major operator in both commercial airline and defense sectors. Its global customer base includes individuals, organizations and governments. With a market capitalization of $54.75 billion, the company has 171,700 full time employees.

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