Why Is Boeing (BA) Up 2.1% Since the Last Earnings Report?
It has been about a month since the last earnings report for Boeing Company BA. Shares have added about 2.1% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it 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 catalysts.
Boeing Beats on Q1 Earnings, Updates 2017 Guidance
Boeing reported adjusted earnings of $2.01 per share for first-quarter 2017, beating the Zacks Consensus Estimate of $1.91 by 5.2%. Reported earnings were also up 15.5% from the year-ago figure of $1.74.
On a GAAP basis, Boeing reported earnings of $2.34 per share compared with $1.83 per share in the year-ago quarter.
Revenues
The company’s revenues amounted to $20.98 billion in the reported quarter, missing the Zacks Consensus Estimate of $21.44 billion by 2.1%. The reported figure also declined 7.3% year over year.
Total Backlog
Backlog at the end of the first quarter was up to $479.5 billion from $473.5 billion at 2016 end. Reported backlog included $27 billion of net orders during the quarter.
Quarterly Segment Results
Commercial Airplane Segment: The segment saw a 0.7% decline in revenues to $14.31 billion. Operating margin for full year expanded 130 basis points (bps) year over year to 8.5%.
Boeing reported commercial deliveries of 169 planes during the first quarter, which was down compared to the year-ago number, due to lower deliveries of 737 and 777 jet models. Sequentially, the numbers reflected an 8.6% decline.
Delivery of the single-aisle 737 jet declined to 113 in the first quarter from 121 a year ago. The decrease was driven by Boeing’s greater involvement in the production of a newer version of its most popular plane, the 737 MAX.
Shipments of the 777 and 787 Dreamliners were 21 and 32, compared with 23 and 30 in the year-ago period, respectively. For the 767 jets, the company’s deliveries were two jets, compared with one jet in the year-ago quarter. Shipments of 747 remained stable at one year over year.
Looking at Boeing’s first quarter order details, we note that the company booked 198 net commercial orders (accounting for cancellations). This reflects a decline from the year-ago figure of 768. The figure included 167 orders for the 737, 15 for the 767, 11 for the 787 and nine for the 777 jets. It is adjusted for loss of four orders for the 747 model.
Boeing Defense, Space & Security (BDS): The segment witnessed an approximate 17.9% year-over-year decrease in first quarter revenues to $6.53 billion. Revenues at all of the three sub-segments – Boeing Military Aircraft (BMA), Network & Space Systems (N&SS) and Global Services & Support (GS&S) – recorded a year-over-year deterioration of 28%, 9.9% and 9%, respectively.
Operating margin for the quarter expanded 100 bps to 11.3%.
Backlog at BDS was $63 billion, 34% of which comprised orders from international clients.
In the defense and space business, Boeing’s deliveries totaled 42 in the first quarter of 2017, down from 50 a year ago, but up from 40 in the preceding quarter. Total deliveries consisted of 16 AH-64 Apache helicopters (both new and remanufactured) and 12 Chinook helicopters (new and renewed). The company also delivered six F/A-18s, four P-8 models, three F-15s and one Commercial and Civil Satellites.
Boeing Capital Corporation (BCC): Boeing Capital reported quarterly revenues of $92 million, compared with $64 million in the year-ago quarter. The segment’s earnings were $39 million compared with $5 million a year ago.
At the end of the first quarter, BCC’s portfolio balance was $4 billion.
Financial Condition
Boeing exited the first quarter with cash and cash equivalents of $8.19 billion and short-term investments of $1.02 billion. At year-end 2016, the company had $8.80 billion of cash and cash equivalents and $1.23 billion of short-term investments. Long-term debt was $10.43 billion in the first quarter, up from $9.57 billion at 2016 end.
Boeing generated $2.09 billion of operating cash flow in the first quarter, up 64.2% year over year. Free cash flow was $1.63 billion in the first quarter compared to the same of $527 million in the year-ago quarter.
Guidance
Boeing’s adjusted or core earnings per share expectation for 2017 are in the range of $9.20–$9.40, up from the prior guided range of $9.10–$9.30. GAAP earnings are now projected to be in the range of $10.35–$10.55 per share compared with the previous range of $10.25–$10.45.
The company still expects 2017 revenues in the range of $90.5−$92.5 billion.
Commercial Airplanes’ 2017 delivery expectations are reiterated in the band of 760−765 airplanes with revenues projected in the $62.5−$63.5 billion band. Operating margin is anticipated in the 9.5–10.0% range.
The company also reaffirmed its projection of 2017 defense revenues in the $28.0–$29.0 billion range with operating margin of approximately 11.5%.
Boeing Capital Corp. expects the aircraft finance portfolio to remain stable. The company still anticipates its segment revenues to be approximately $0.3 billion.
Boeing’s 2017 R&D forecast has been reiterated at approximately $3.6 billion. Capital expenditures for 2017 are still expected to be $2.3 billion.