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Will Defense Deliveries Drive Boeing's (BA) Q2 Earnings?

Zacks Equity Research
·4 min read

The Boeing Company’s BA Defense, Space & Security (BDS) segment is likely to have recorded moderate top-line growth in second-quarter 2020, courtesy of impressive deliveries of the company’s varied defense products. However, coronavirus-induced margin reduction might have dragged down its earnings.

Boeing’s second-quarter 2020 results are scheduled to be released on Jul 29.

Click here to know how the company’s overall Q2 performance is expected to be.

Steady Order Flow to Aid Backlog

With the current U.S. administration spending significantly on the nation’s defense for the past couple of years, Boeing’s defense and space unit has been witnessing solid order flow from the Pentagon, NASA and Congress for its varied products. This, in turn, has been boosting BDS unit’s backlogs.

The Boeing Company Price and EPS Surprise

The Boeing Company Price and EPS Surprise
The Boeing Company Price and EPS Surprise

The Boeing Company price-eps-surprise | The Boeing Company Quote

Keeping up with its usual trend, the aerospace giant clinched a handful of multi-milliondollar contracts during the second quarter as well. Some of these contract wins include a $2.6 billion deal for delivering 650 SLAM ER missiles as well as 402 Block II missiles and support equipment to Saudi Arabia. The jet maker also won a $439 million deal to developnew Apache AH-64E aircraft and Longbow crew trainers to the Moroccan army. These should duly get reflected in the upcoming results in the form of backlog growth.

Will Impressive Deliveries Aid?

Boeing’s second-quarter 2020 defense delivery figures reflected a notable increase of18.9% from the year-ago period.

In the quarter, its defense deliveries totaled 44, up from 37 in the year-ago period. Such impressive delivery figures are expected to have boosted the defense segment’s performance in the soon-to-be-reported quarter.

In April 2020, Boeing’s KC-46 won a contract from the U.S. Air Force to develop and integrate a new Remote Vision System. To this end, the company aims to upgrade this tanker’s existing feature to the extent that no other tanker will have the technological capabilities of the KC-46. We may expect further updates on this once Boeing releases its second-quarter results.

However, due to the spread of the novel coronavirus across the globe, a handful of Boeing’s production units were closed for some time in the second quarter. Consequently, productivity inefficiencies and COVID-19-related factory disruption may have impacted margins and in turn, dragged down BDS earnings.

What the Zacks Model Unveils

According to the Zacks model, the combination of two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better — increases the odds of an earnings surprise.

Boeing has an Earnings ESP of -4.82% and a Zacks Rank #4 (Sell). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks to Consider

Here are some defense companies you may want to consider as these have the right combination of elements to post an earnings beat in their upcoming release:

Curtiss-Wright Corp. CW has an Earnings ESP of +13.62% and a Zacks Rank #3.

Leidos Holdings, Inc. LDOS has an Earnings ESP of +0.11% and a Zacks Rank #3.

A Recent Defense Release

Lockheed Martin LMT reported second-quarter 2020 adjusted earnings of $6.13 per share, which surpassed the Zacks Consensus Estimate of $5.71 by 7.4%. It carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Zacks Top 10 Stocks for 2020

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The Boeing Company (BA) : Free Stock Analysis Report
 
Lockheed Martin Corporation (LMT) : Free Stock Analysis Report
 
CurtissWright Corporation (CW) : Free Stock Analysis Report
 
Leidos Holdings, Inc. (LDOS) : Free Stock Analysis Report
 
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