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Buy Boeing (BA) Stock Ahead of Q2 Earnings Report?

Christopher Vargas

Boeing BA is a company that had a solid first couple of months at the beginning of 2019. But, the aerospace giant went through a major setback in March involving the grounding of one of its aircrafts, the 737 MAX, after two similar crashes occurred within four months of each other. Ethiopian Airlines grounded its fleet on March 10th, with other regulators and airlines following suit within the next couple of days. Boeing is set to announce its second quarter earnings on July 24th before the opening bell. Let’s take a closer look at the company and what to expect from them this earnings season.

Overview

Boeing is the largest aircraft manufacturer in terms of revenues, orders and deliveries. The company is based in Chicago, and is one of the major aerospace and defense contractors. The aircraft manufacturer entered a partnership with fellow aerospace company Embraer ERJ that is expected to enhance Boeing’s earnings growth. Some of the Chicago-based aerospace company’s clients include the U.S Department of Defense, the Department of Homeland Security, and NASA. The aerospace giant currently operates in four segments: Boeing Commercial Airplanes; Boeing Defense, Space, and Security; Boeing Global Services; and Boeing Capital Corporation.

The Boeing Commercial Airplanes segment produces and markets commercial jets along with providing support services. Boeing Defense, Space, and Security is comprised by three smaller units that covers the three fields. Boeing Global Services provides parts, maintenance, logistics support, and data analytics, amongst other services for commercial and government consumers worldwide. The Boeing Capital Corporation segment provides selective financing options for commercial airplanes segment customers.

Looking at its stock performance, shares of Boeing seemed ready to break out of the stagnancy it experienced in 2018 by rising over 36% in the first two months of 2019 before the grounding setback. Year-to-date, BA has gained roughly 16.3% falling behind the broader aerospace market.

Q2 Outlook

Boeing was able to bring in revenues of $22.9 billion in the first quarter of 2019, beating Consensus Estimates by 3%. The company’s Commercial Airplanes segment attributed 51.5% to total revenue with $11.82 billion. Boeing’s Defense, Space, and Security segments contributed $6.61 billion. Furthermore, the company’s Global Services segment reeled in $4.62 billion and its Capital Corporation branch brought in $66 million. Boeing was able to deliver a grand total of 149 commercial airplanes in the first quarter of 2019. Earnings-wise, the aerospace giant was able to report earnings of $3.16 per share, which exceeded our Consensus Estimates by 1.61%.

Our Consensus Estimates are currently calling for a year-over-year earnings decline of 43.24%, with revenues decreasing by 16.45% for the current quarter. The projected $1.89 EPS Consensus Estimate would be a decline of 40.2% compared to the EPS reported in Q1. Estimates are also calling for the company’s Commercial Airplanes sector to reel in $9.1 billion this quarter, which is a 23.3% decline from Q1 and the Defense, Space, and Security sector to bring in $6.53 billion. Furthermore, Estimates are forecasting the Capital Corporation segment to bring in revenue of $69.3 million and the Global Services segment to attribute $4.58 billion.

Bottom Line

Boeing had a setback of monumental proportions back in March, which has put the company to the test. The aircraft manufacturer seemed to be on track to have a tremendous year prior to the grounding of their aircrafts. As a result, earnings and revenue are projected to take a hit this quarter, which doesn’t bode well for the company. Consensus Estimates continue to project year-over-year losses for the company through 2019 but predicts light at the end of tunnel in 2020. Earnings estimate revisions for this current quarter have also risen in the right direction for Boeing, possibly bringing better than expected news for the company.

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