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Boeing's Q2 Commercial Deliveries Fall Y/Y, Defense in Line

Zacks Equity Research

Aerospace behemoth The Boeing Company BA reported second-quarter 2017 deliveries, which show that commercial shipments were down 8% on a year-over-year basis. However, defense shipments were in line with the year-ago figure.

Q2 Deliveries

Boeing cited lower demand for its 737, 777, 787 and 767 jets, which led to the year over year decline in commercial deliveries of 183 airplanes during the second quarter. However, the numbers reflected 8.3% growth, sequentially.

Delivery of the single-aisle 737 jet declined to 123 from 127 a year ago, in the same period. This reduction was due to 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 33 compared with 28 and 38 in the year-ago period, respectively. The company delivered three 767 jets, compared with four in the year-ago quarter. However, shipments of 747 were three compared with two in the year-ago period.

It is to be noted that in the defense and space business, Boeing’s deliveries totaled to 45 in the second quarter, in line with the year-ago figure. However, the reported figure was up from 42 in the preceding quarter. Total deliveries consisted of 17 AH-64 Apache helicopters (both new and remanufactured) and 11 Chinook helicopters (new and renewed). In addition, the company delivered six F/A-18s, five P-8 models, four F-15s, and two Commercial and Civil Satellites.

Notably, Boeing’s total deliveries were 228 units in the quarter compared with 244 a year ago.

1H17 Numbers

In the first half of the year, Boeing’s total shipments were 439 units compared with 470 in the corresponding year-ago period. Of the total, commercial deliveries were 352 (down from 375 in 1H16) and defense deliveries were 87 units (down from 95 in 1H16).

Order Details

A look at Boeing’s second-quarter order details reveals that the company booked 183 net commercial orders (accounting for cancellations). This reflects an increase from the year-ago figure of 171. The figure included 95 orders for the 737, 64 for the 787, and 24 for the 777 jets.

In the first half of 2017, Boeing booked 381 net commercial orders (accounting for cancellations). On the contrary, Boeing’s rival, Airbus Group SE EADSY, registered net bookings of just 203 aircraft in the same period, trailing far behind it.

Given that Boeing and Airbus are the two largest players in the commercial aircraft space, they are considered to be the direct rivals. Also, the enhanced orders place Boeing in a better position in the industry.

Our View

Boeing’s deliveries were sluggish due to the transition to the 737 MAX. The new MAX planes take longer time in assembling than the old 737 models. However, deliveries are expected to increase this year. Meanwhile, Boeing intends to cut the production rate of the 777 wide-body jets by 40%.

Moreover, the company anticipates the world will need 41,030 new planes, worth $6.1 trillion between 2017 and 2036 timeframe. Boeing expects single-aisle jets to be the major driver behind demand growth, comprising 72% of the total projection. This translates into worldwide demand for 29,530 single-aisle jets, worth $3.2 trillion, in the next 20 years. The anticipated figure also reflects 5% increase over last year's projection.
Price Movement

Share price of Boeing has increased 53.3% in the last 12 months, outperforming the Zacks categorized Aerospace–Defense industry’s gain of 26%. This could be because the company’s strong balance sheet and cash flows provide financial flexibility in matters of incremental dividend, ongoing share repurchases as well as earnings accretive acquisitions.

Zacks Rank & Stocks to Consider

Boeing currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the same space include General Dynamics Corp. GD and Northrop Grumman Corp. NOC carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

General Dynamics surpassed estimates in the last four quarters with an average positive surprise of 5.20%. The company's 2017 estimates moved up 0.8% to $9.79 in the last 90 days.

Northrop Grumman surpassed estimates in the last four quarters with an average positive surprise of 10.87%. The company's 2017 estimates climbed 4.6% to $12.37 in the last 90 days.

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