Earnings Scorecard: Boeing

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Following the release of third quarter 2012 results, most of the analysts providing estimates for The Boeing Company (BA) have raised their earnings estimates for 2012. The revision in estimates mainly reflects the guidance provided by the company.

Third Quarter 2012 Recap

Boeing posting strong core performance 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 grew 13% year over year to $20 billion. The top line marginally missed the Zacks Consensus Estimate of $20.1 billion.

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.

(Read our detailed earnings report at: Boeing Beats EPS, Misses Revenue).

Agreement of Analysts

Estimate revisions for 2012 indicate a significant positive bias. Of the 21 available estimates, 19 estimates moved up for 2012 following the release of third quarter 2012 results with no estimates moving down.

Meanwhile, the estimate revisions over the last 30 days for the final quarter of 2012 also show a similar trend with 11 of the 20 estimates heading north with just 2 moving in the opposite direction.

The upward revision in estimates reflects Boeing’s strong performance in the third quarter and its raised outlook for 2012. Following the release of third quarter results, Boeing upped its earnings outlook for 2012 to $4.80–$4.95 (old guidance: $4.40–$4.60 per share).

Magnitude – Consensus Estimate Trend

With the significant positive bias in estimate revisions, estimates for both full-year 2012 and the ongoing quarter have gone up by a few cents. While 2012 estimates are up by 27 cents, ongoing quarter estimates have been raised 5 cents.

The Zacks Consensus Estimate for full-year 2012 and the ongoing quarter now stands at $4.98 and $1.17 per share, respectively.

Neutral on Boeing

Boeing enjoys a unique position as the largest aircraft manufacturer in the world in terms of revenues, orders and deliveries, and is also one of the largest aerospace and defense contractors. Besides, its revenues are spread across more than 90 countries around the globe.

The company is among the best-positioned in its sector due to its balanced exposure to commercial aircraft and defense equipment. With the gradual recovery of the global economy, we believe freight and passenger traffic will improve going forward. Also, the U.S. defense budget is skewed towards a number of prominent Boeing programs.

Overall, the growth momentum will be maintained by an order backlog close to $378 billion, planned production rate increases and a globally diversified customer base. However in the near term, headwinds over the global airline industry along with expected cutbacks in the U.S. defense budget loom large over the current valuation of the company. Thus, considering the fundamentals, we are maintaining our Neutral recommendation on the stock.

Boeing currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. This is in sync with other aerospace and defense behemoths, General Dynamics Corporation (GD) and Lockheed Martin Corporation (LMT).

About Earnings Estimate Scorecard

As a PhD from MIT, Len Zacks proved over 30 years ago that earnings estimate revisions are the most powerful force impacting stock prices. He turned this ground breaking discovery into two of the most celebrating stock rating systems in use today. The Zacks Rank for stock trading in a 1 to 3 month time horizon and the Zacks Recommendation for long-term investing (6+ months). These “Earnings Estimate Scorecard” articles help analyze the important aspects of estimate revisions for each stock after their quarterly earnings announcements. Learn more about earnings estimates and our proven stock ratings at http://www.zacks.com/education/

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