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Boeing Tops Earnings in 1Q

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Aerospace giant The Boeing Company (BA - Free Report) reported stellar first quarter 2013 results, attributable to solid performance across the company's businesses. Its adjusted first quarter 2013 earnings came in at $1.73 per share, beating the Zacks Consensus Estimate of $1.47 by 17.7% as well as the year-ago profit level of $1.40 by 24%.

The company’s strong numbers came from solid operating performance fueled by productivity gains and impressive program execution.

However, on the revenue front, total revenue was $18,893 million, down 3% from $19,383 million in the first quarter 2012 while beating the Zacks Consensus Estimate of $18,666 million.

Although higher airplane deliveries on the 737 and 777 pulled up the quarterly revenue beyond our expectation, lower 787 deliveries undid the gains.

Backlog also increased to a record $392 billion that includes $20 billion of net orders during the quarter.

Segment Results

Commercial Airplane Segment

Boeing’s deliveries in the Commercial Airplane segment remained at par with the year-ago quarter at 137. The segment saw a 2% decrease in revenue to $10,690 million due to delivery mix and lower services revenue.

In the reported quarter, the 737 model continued to be the pillar of Boeing’s strength in the commercial airplane sector with deliveries touching 102 airplanes. This was followed by its 777 model with 24 deliveries. In the year-earlier period, the company delivered 99 units of the 737 and 20 units of the 777 model.

The company also delivered 6 747 series, 4 767 series and single 787 series airplanes versus 6, 7 and 5 deliveries, respectively, in the year-ago period.

Operating margin surged 150 basis points (bps) to 11.4% on the back of a favorable delivery mix and lower research and development (R&D) expenses. This was partially offset by higher period costs.

Boeing won net orders for 209 planes in the Mar 2013 quarter.  Backlog at first quarter 2013 end remained strong with more than 4,400 airplanes valued at a record $324 billion.

Boeing Defense, Space & Security (BDS)

Boeing Defense, Space & Security segment witnessed a 1% fall in its quarterly revenue to $8,110 million. Of the sub-segments, only Network & Space Systems (N&SS) witnessed a top-line climb of 5%. However, both the Boeing Military Aircraft (BMA) and the Global Services & Support (GS&S) registered declines of 3% and 5%, respectively.

Quarterly operating margin climbed 130 bps to 10.3%. This was due to higher margins in all the three sub-segments.

Backlog at Defense, Space & Security stood at $68.0 billion, 42% of which comprises orders with international clients.

Boeing Capital Corporation (BCC)

Boeing Capital Corporation reported quarterly revenues of $105 million compared with $125 million in the year-ago quarter. The segment witnessed 33.3% growth in its earnings from operations valued at $44 million in the reported quarter.

At the end of first quarter 2013, BCC's portfolio balance was $4.2 billion.

Financial Condition

Boeing ended the first quarter with cash and cash equivalents of $8,335 million and short-term investments of $3,518 million. At year-end 2012, the company had $10,341 million in cash and cash equivalents and $3,217 million of short-term investments. Long-term debt stood at $8,254 million in the reported quarter (versus $8,973 million at the 2012-end) with a debt-to-capitalization ratio of 52.2%.

The company generated more than $524 million of cash from operating activities in the first quarter, compared with $837 million generated in the same period last year.


Boeing reaffirmed its full-year 2013 GAAP earnings in the range of $5.00–$5.20 per share, and adjusted earnings of $6.10–$6.30 per share. Revenue for 2013 is expected to be between $82 billion and $85 billion.

Commercial Airplanes' 2013 deliveries are expected to be between 635 and 645 airplanes. This includes more than 60 units of 787 deliveries. Commercial Airplanes' 2013 revenue is expected in a band of $51 billion and $53 billion with operating margin of approximately 9.5%.

Although the threat of defense cutbacks will loom over the company going forward, the company still expects defense revenue for 2013 to be between $30.5 billion and $31.5 billion with operating margin greater than 9%.  

Boeing Capital Corporation expects that its aircraft finance portfolio will continue to decline in 2013, as new aircraft financing of less than $0.5 billion is expected to be lower than the normal portfolio runoff through customer payments and depreciation.  

Boeing's 2013 R&D forecast is approximately $3.4 billion.  Capital expenditures for 2013 are expected to be between $2.3 billion and $2.5 billion.  

787 Update

Concerns relating to 787 units were finally resolved as Boeing received the green light from the U.S. Federal Aviation Administration (“FAA”) for the 787 Dreamliner’s redesigned battery.

Following a broad review of certification tests, Boeing’s new improved 787 battery system was approved by the FAA. The company has already initiated the modification work and FAA will likely issue a directive soon, lifting the three-month ban once the fixing is complete.

Zacks Rank

Boeing currently retains a Zacks Rank #3 (Hold).

Its closest peer, Northrop Grumman Corporation (NOC - Free Report) reported first quarter 2013 results before the opening bell today. Adjusted earnings per share of $1.94 easily surpassed the Zacks Consensus Estimate of $1.73 and the year-ago figure of $1.88.  The significant upside in earnings was attributable to a lower share count and strong operating performance.

Another peer, General Dynamics Corporation’s (GD - Free Report) first-quarter 2013 operating earnings of $1.62 per share surpassed the Zacks Consensus Estimate of $1.51 by 7.3%. Earnings were ahead of the year-ago figure by 5 cents.

Again, the world’s largest stand-alone defense contractor, Lockheed Martin Corporation (LMT - Free Report) posted first quarter 2013 adjusted earnings of $2.48 per share, comfortably surpassing the Zacks Consensus Estimate of $2.01 by 23.4%. The upcast in earnings was mainly attributable to lower tax expenses.

While Northrop Grumman and Lockheed Martin retain a Zacks Rank #3 (Hold), General Dynamics carries a Zacks Rank #4 (Sell).

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