The Boeing Company BA is scheduled to release fourth-quarter 2024 results on Jan. 28, 2025, before market open.
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The Zacks Consensus Estimate for revenues is pegged at $17.29 billion, implying a 21.5% decline from the year-ago quarter's reported figure. The consensus mark for fourth-quarter earnings is pegged at a loss of $2.29 per share, suggesting a deterioration from a loss of 47 cents in the prior-year quarter. The bottom-line estimate declined significantly in the past 60 days.
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Boeing’s earnings missed the Zacks Consensus Estimate in two of the trailing four quarters and beat the same in the other two, the average negative surprise being 1.82%.
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Earnings Whispers
Our proven model does not conclusively predict an earnings beat for Boeing this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat, which is not the case here. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
BA has a Zacks Rank #3 and an Earnings ESP of -2.33%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Key Factors to Consider
Solid Expectations From Global Services Business
We remain optimistic about Boeing Global Services’ (“BGS”) top-line performance in the fourth quarter, as steadily increasing global commercial air travel must have bolstered fleet utilization, thereby boosting commercial jet services sales volume.
Higher commercial services revenues are also likely to have boosted BGS unit’s earnings from operations in the soon-to-be-reported quarter.
The Zacks Consensus Estimate for the unit’s revenues is pegged at $5,077.3 million, indicating an improvement of 4.7% from the year-ago quarter’s reported number. The consensus mark for earnings is pinned at $875.1 million, indicating solid growth of 3.9% year over year.
Dismal Commercial & Defense Deliveries to Hurt Q4 Results
Boeing’s fourth-quarter deliveries reflect a 63.7% decline in commercial shipments from the year-ago quarter’s reported figure. Also, defense shipments plunged 33.3% year over year.
Successful deliveries of finished products play a crucial role in boosting revenue growth for manufacturing companies like Boeing.
So, the top-line results from both of Boeing’s commercial and defense business segments are expected to reflect deteriorating year-over-year performance due to the dismal delivery figures.
The consensus estimate for Boeing’s commercial airplanes business segment’s top line is pegged at $5,078.8 million, implying a 51.5% plunge from the year-ago quarter’s reported figure. The Zacks Consensus Estimate for the defense unit’s revenues is pegged at $6,446.8 million, indicating a decline of 4.4% year over year.
Overall Picture
Considering that Boeing’s military and commercial revenues accounted for almost 76% of its total revenues as of 2023-end, the notable deterioration in delivery figures for both the commercial and defense shipments is likely to have hurt the company’s overall fourth-quarter top-line performance, outweighing the positive revenue contribution from the BGS unit.
Lower operating profit from reduced year-over-year deliveries of commercial jets and dismal sales volume projected from its defense products can be expected to have adversely impacted BA’s quarterly earnings. Moreover, reach-forward losses from the 777X and 767 jet programs, lower margins caused by production disruption due to the labor strike that ended in November 2024, and higher research and development expenses are likely to have hurt BA’s quarterly earnings.
Price Performance & Valuation
Boeing’s shares have exhibited a downward trend, losing a notable percentage over the past year. Specifically, the stock has plunged 18.3% in the past year, underperforming the Zacks aerospace-defense industry’s decline of 2.3%.
BA One-Year Performance
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As evident from the image, other notable stocks from the same industry have outperformed BA’s performance. Shares of Embraer ERJ, Leidos Holdings LDOS and Lockheed Martin LMT have rallied 137.7%, 44.3% and 10.5%, respectively, year to date.
From a valuation perspective, Boeing is trading at a discount compared to its industry. Currently, BA is trading at 1.64X forward 12-month sales, which is lower than the industry’s forward earnings multiple of 1.29X. The stock is also trading lower than its five-year median of 1.36.
Price-to-Sales (forward 12 Months)
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Investment Thesis
Steadily improving commercial air travel statistics, which have been boosting the company’s BGS unit’s performance, seem to have failed its commercial delivery figure in the fourth quarter. Such dismal commercial deliveries can be attributed to the delays in the progress of BA’s major commercial jet programs due to the International Association of Machinists and Aerospace Workers’ (“IAM”) work stoppage. This labor strike that lasted for nearly two months also affected the production rate for major defense products of the company, resulting in poor delivery performance for its defense unit.
Declined deliveries might have also hurt Boeing’s free cash flow count.
Moreover, persistent supply-chain challenges, along with the resultant pre-tax charges associated with the IAM work stoppage, might have elevated BA’s leverage. This is evident from its long-term debt-to-capital ratio compared to its industry.
BA’s Long-Term Debt-to-Capital
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Should You Buy or Sell BA?
Investors interested in Boeing should refrain from buying the stock before next Tuesday, considering the company’s elevated leverage. While its fourth-quarter results are expected to reflect some positive growth trends, particularly in the BGS unit, the downward revision in its earnings estimates and a negative Earnings ESP pose serious concerns. Despite possessing a discounted valuation, investors have already been losing confidence in this stock, as evident from the dismal performance of BA’s shares at the bourses over the past year.
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