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Boeing (BA) Q4 Earnings Top on Higher Revenues Y/Y, Backlog Up

Zacks Equity Research

The Boeing Company BA reported adjusted earnings of $5.48 per share for fourth-quarter 2018, which outshined the Zacks Consensus Estimate of $4.52 by 21.2%. The bottom line reflected an improvement of 8% from $5.07 registered in the year-ago quarter on solid revenue growth.

Excluding one-time items, this aerospace giant reported GAAP earnings of $5.93 per share, up 8% from $5.49 per share in the year-ago quarter.
For 2018, Boeing’s adjusted earnings came in at $16.01 per share, which surpassed the Zacks Consensus Estimate of $15.06 by 6.3%.

Revenues

In the quarter under review, the company's revenues amounted to $28.34 billion, which exceeded the Zacks Consensus Estimate of $26.65 billion by 6.3% and improved 14% year over year. This improvement was driven by increased revenues from all segments, except Boeing Capital.

For 2018, Boeing generated sales of $101.13 billion, which outpaced the Zacks Consensus Estimate of $99.62 billion by 1.5%.

The Boeing Company Price, Consensus and EPS Surprise

The Boeing Company Price, Consensus and EPS Surprise | The Boeing Company Quote

Total Backlog

Backlog at the end of 2018 increased to $490.48 billion from $474.64 billion at the end of 2017. Reported backlog included $27 billion of net orders during the fourth quarter.

Segmental Performances

Commercial Airplane Segment: Revenues at this segment increased 14% to $17.31 billion on higher deliveries and favorable mix. Operating margin for the quarter expanded 400 basis points (bps) year over year to 15.6% driven by higher 737 volume and strong operating performance on production programs.

Boeing delivered 238 commercial planes during the quarter under review, up 14%.

A look at Boeing’s fourth-quarter order details reveals that the company booked 262 net commercial orders (accounting for cancellations). Backlog for this segment was valued at $412 billion.

Boeing Defense, Space & Security (BDS): At this segment, revenues witnessed a 16% year-over-year improvement to $6.11 billion in the fourth quarter. The uptick was driven by increased sales volume across F/A-18, satellites and weapons. Meanwhile, operating margin for the quarter expanded 60 bps year over year to 10.9% on account of favorable mix.

Backlog at BDS was $57 billion, 30% of which comprised orders from international clients.

Global Services: Revenues at this segment improved 29% to $4.89 billion backed by higher parts volume including the acquisition of KLX Aerospace. Operating margin expanded 30 bps year over year to 15%, thanks to improved performance.

Boeing Capital Corporation (BCC): Boeing Capital reported quarterly revenues of $60 million compared with $73 million registered in the year-ago quarter. The segment’s operating earnings were $8 million compared with $27 million a year ago.

At the end of fourth-quarter 2018, BCC's portfolio balance was $2.8 billion.

Financial Condition

Boeing exited 2018 with cash and cash equivalents of $7.64 billion, and short-term and other investments of $0.93 billion. At the end of 2017, the company had $8.81 billion of cash and cash equivalents, and $1.18 billion of short-term and other investments. Long-term debt amounted to $10.66 billion at the end of 2018, up from $9.78 billion at 2017-end.

Boeing generated $15.32 billion of operating cash flow at the end of 2018, up 14.9% year over year. Free cash flow totaled $13.6 billion at 2018 end compared with free cash of $11.61 billion at the end of 2017.

Guidance

Boeing issued 2019 financial outlook. For the full year, it expects revenues of $109.5-$111.5 billion and adjusted or core earnings per share of $19.90-$20.10. GAAP earnings are now projected in the range of $21.90-$22.10 per share.

Commercial Airplanes' 2019 delivery expectations are projected between 895 and 905 with revenues expected in the range of $64.5-$65.5 billion. Moreover, operating margin is anticipated to be in the 14.5-15.0% band.

For 2019, the company expects defense revenues of $26.5-$27.5 billion and operating margin is anticipated to be more than 11%.

Boeing Capital expects the aircraft finance portfolio to remain stable.

Boeing's 2019 R&D is projected to be approximately $4 billion and capital expenditures are now expected to be approximately $2.3 billion.

Zacks Rank

Boeing currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Recent Defense Releases

Teledyne Technologies TDY reported adjusted fourth-quarter 2018 earnings of $2.33 per share, which surpassed the Zacks Consensus Estimate of $2.19 by 6.4%. The bottom line also improved 27.3% from the year-ago quarter’s figure of $1.83.

Textron TXT reported fourth-quarter 2018 adjusted earnings from continuing operations of $1.15 per share, which exceeded the Zacks Consensus Estimate of 98 cents by 17.3%. The bottom line also surged 55.4% from 74 cents registered in the year-ago quarter.

Hexcel Corporation HXL reported fourth-quarter 2018 adjusted earnings of 82 cents per share, beating the Zacks Consensus Estimate of 80 cents by 2.5%. Further, the bottom line improved 17.1% from 70 cents registered a year ago.

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