Will Dismal Defense Deliveries Hit Boeing (BA) in Q3 Earnings?
The Boeing Company’s BA Defense, Space & Security (BDS) segment is likely to have recorded impressive third-quarter 2023 revenues, owing to solid sales from space programs amid lower deliveries of its defense products. On the other hand, lower charges from development programs might have boosted the unit’s quarterly bottom-line performance.
Boeing’s third-quarter results are scheduled to be released on Oct 25.
Click here to know how the company’s overall performance might have been in the soon-to-be-reported quarter.
Steady Order Flow to Aid Backlog
With the U.S. administration spending significantly on the nation’s defense capabilities 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 consistently boosting the BDS segment’s backlog.
The Boeing Company Price and EPS Surprise
The Boeing Company price-eps-surprise | The Boeing Company Quote
The defense market has been relatively stable amid the uncertainties caused by the COVID-19 pandemic. Boeing has been witnessing a solid global demand for its major combat programs, which translated into an overall order value of $6 billion for the BDS unit in the second quarter.
We expect the upcoming results to reflect a similar order count for the unit, thereby bolstering its backlog figure.
Will Dismal Deliveries Hurt Q3 Performance?
Boeing’s third-quarter defense delivery figures indicate a decline of 22.2% from the year-ago period’s level.
Its defense deliveries totaled 28 in the quarter, down from 36 in the prior-year quarter. Such declining delivery figures are expected to have hurt the defense segment’s revenues in the soon-to-be-reported quarter. Nevertheless, increased sales from space and proprietary programs are projected to have boosted the BDS unit’s top-line performance.
The Zacks Consensus Estimate for the defense unit’s revenues is pegged at $6,094 million, indicating an improvement of 14.8% year over year.
Earnings Prospect
Lower delivery volumes for its defense products are likely to have had an adverse impact on the BDS segment’s bottom line.
Moreover, the impact of supply-chain constraints might have hurt its third-quarter earnings. Nevertheless, strong order activities in the previous quarters as well as lower charges from development programs, as BA progresses in these programs, are expected to have favorably contributed to BDS’ overall earnings performance.
Notably, the bottom-line estimate for the company’s defense unit is pegged at a loss of $500 million, indicating an improvement from the year-ago quarter’s reported loss of $2,798 million.
What the Zacks Model Unveils
According to the Zacks model, the combination of two key ingredients — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) — increases the odds of an earnings beat. That is not the case here.
Boeing has an Earnings ESP of 0.00% and a Zacks Rank #3 at present. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Stocks to Consider
Below are three defense stocks that have the right combination of elements to post an earnings beat this time around.
General Dynamics GD is expected to release third-quarter results on Oct 25. GD has an Earnings ESP of +0.73% and a Zacks Rank #3 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
General Dynamics delivered a four-quarter average earnings surprise of 2.99%. The consensus estimate for earnings is pegged at $2.87 per share, while that for sales is pinned at $9.94 billion.
L3Harris Technologies LHX is scheduled to release third-quarter results on Oct 26. LHX has an Earnings ESP of +0.86% and a Zacks Rank #3 at present.
L3Harris delivered a four-quarter average negative earnings surprise of 0.67%. The Zacks Consensus Estimate for LHX’s earnings is pegged at $3.07 per share, while that for sales is pinned at $4.83 billion.
Northrop Grumman NOC is expected to report third-quarter results on Oct 26. NOC has an Earnings ESP of +1.48% and a Zacks Rank #3 at present.
NOC delivered a four-quarter average earnings surprise of 4.38%. The consensus mark for earnings is pegged at $5.81 per share, while that for sales is pinned at $9.67 billion.
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