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Boeing (BA) Up 4.8% Since Earnings Report: Can it Continue?

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Company News For Jun 21, 2018

Companies in the news are: WGO,SBUX,PYPL,SYNA

A month has gone by since the last earnings report for The Boeing Company BA. Shares have added about 4.8% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is BA due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Boeing Beats on Earnings in Q1, Hikes '18 EPS View

The Boeing Company reported adjusted earnings of $3.64 per share for first-quarter 2018, beating the Zacks Consensus Estimate of $2.59 by 40.5%. The quarterly bottom line reflected an improvement of 68% from $2.17 in the year-ago quarter.

Excluding one-time items, the aerospace giant reported GAAP earnings of $4.15 per share, up 63% from $2.54 per share in the year-ago quarter.

Revenues

The company's first-quarter revenues amounted to $23.38 billion in the quarter, beating the Zacks Consensus Estimate of $22.32 billion by 4.8%. The top line also improved 6% year over year, driven by improved revenues from all segments, except Boeing Capital.

Total Backlog

Backlog at the end of first-quarter was up to $486.2 billion from $474.8 billion at the end of 2017. Reported backlog included $34 billion of net orders during the reported quarter.

Quarterly Segment Results

Commercial Airplane Segment: The segment saw a 5% rise in revenues to $13.65 billion, on higher deliveries and mix. Operating margin for the quarter expanded 430 basis points (bps) year over year to 11%.

Boeing reported delivered 184 commercial planes during the quarter, which was up 9%.

A look at Boeing’s first-quarter order details reveals that the company booked 221 net commercial orders (accounting for cancellations). Backlog for this segment was valued at $415 billion.

Boeing Defense, Space & Security (BDS): The segment witnessed an approximate 13% year-over-year increase in first-quarter revenues to $5.76 billion, driven by  C-17, international fighters, and weapons volume. Operating margin for the quarter expanded 60 bps to 11.3%.

Backlog at BDS was $50 billion, 36% of which comprised orders from international clients.

Global Services: The segment saw 8% growth in revenues to $3.94 billion, reflecting growth in commercial services. Operating margin for the quarter contracted 80 bps year over year to 16.3%, on account of product and services mix.

Boeing Capital Corporation (BCC): Boeing Capital reported quarterly revenues of $65 million compared with $92 million in the year-ago quarter. The segment’s earnings were $20 million compared with $39 million a year ago.

At the end of first-quarter, BCC's portfolio balance was $2.9 billion.

Financial Condition

Boeing exited the first quarter with cash and cash equivalents of $9.24 billion and short-term and other investments of $0.66 billion. At year-end 2016, the company had $8.81 billion of cash and cash equivalents and $1.18 billion of short-term and other investments. Long-term debt was $10.47 billion at the end of first quarter, up from $9.78 billion at 2076-end.

Boeing generated $3.14 billion of operating cash flow at the end of first-quarter, up 49.5% year over year. Free cash flow was $2.74 billion at first-quarter 2018 end compared with free cash of $1.63 billion at the end of 2017’s first quarter.

Guidance

Boeing raised its 2018 earnings guidance. The company currently expects its adjusted or core earnings per share in the range of $14.30-$4.50, up from prior guidance range of $13.80-$14.00. GAAP earnings are currently projected in the range of $16.40-$16.60, compared to earlier range of $15.90-$16.10 per share.

The company continues to expect 2018 revenues in the range of $96-$98 billion.

Commercial Airplanes' 2018 delivery expectations are reiterated in the band of 810 to 815 with revenues still projected in the range of $59.5-$60.5 billion. Operating margin is now anticipated to be around 11.5%, compared to earlier expectation of more than 11%.

The company continues to project 2018 defense revenues in the $21.5-$22.5 billion range. Operating margin is still anticipated to be around 11%.

Boeing Capital expects the aircraft finance portfolio to remain stable. The company still anticipates its segment revenues to be approximately $0.2 billion.

Boeing's 2018 R&D is still forecasted to be approximately $3.7 billion. Capital expenditures for 2018 is also expected to remain approximately $2.2 billion.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month. There have been three revisions higher for the current quarter compared to three lower.

The Boeing Company Price and Consensus

 

The Boeing Company Price and Consensus | The Boeing Company Quote

VGM Scores

At this time, BA has a strong Growth Score of A, though it is lagging a lot on the momentum front with a D. The stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate that the stock is more suitable for growth investors than value investors.

Outlook

BA has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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