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Will Lower Defense Deliveries Hit Boeing (BA) in Q2 Earnings?

The Boeing Company’s BA Defense, Space & Security (BDS) segment is likely to have recorded solid revenues in second-quarter 2021, courtesy of solid performance delivered by space programs. The quarterly backlog is also expected to have been solid.

Boeing’s second-quarter 2021 results are scheduled to be released on Jul 28.

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

Steady Order Flow to Aid Backlog

With the 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 consistently boosting BDS unit’s backlog.

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

Amid the uncertainties caused by the COVID-19 pandemic, the defense market has been relatively stable. Boeing has been witnessing solid, global demand for its major combat programs, which translated into a handful of multi-million-dollar orders that the BDS unit won in the second quarter. We expect the upcoming results to duly reflect this order count in terms of solid backlog figure for the BDS unit.

Will Deliveries Hurt Q2 Results?

Boeing’s second-quarter 2021 defense delivery figures reflected a slight dip of 2.3% from the year-ago period.

In the quarter, its defense deliveries totaled 43, down from 44 in the year-ago period. Such unimpressive delivery figures may have had an adverse impact on the defense segment’s revenues in the soon-to-be-reported quarter.

Although defense delivery figures were unimpressive for Boeing this time, solid revenues from space programs are expected to have boosted the overall Q2 performance of BDS unit. For instance, in April 2021, Boeing started delivery of the Space Launch System (SLS) rocket cryogenic core stage to NASA. In June, the company delivered two new, advanced solar arrays to the International Space Station (ISS).

Notably, the Zacks Consensus Estimate for the company’s defense unit revenues, pegged at $7,115 million, indicates an increase of 8% from the year-ago quarter’s reported figure.

Earnings Prospects

COVID-induced business disruptions and production inefficiencies have been hampering the BDS unit’s operating margin. However, we witnessed a reversal of this trend in the first quarter, with absence of charges related to the KC-46A program being a primary catalyst. We expect a similar positive trend in second-quarter results.

Expectations of solid operating margin along with revenue growth make us optimistic about BDS unit’s earnings performance in the soon-to-be-reported quarter.

Notably, the Zacks Consensus Estimate for the company’s defense unit earnings, pegged at $716 million, indicates an improvement of 19.3% from the year-ago quarter’s reported figure.

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 0.00% and a Zacks Rank #3. 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 releases:

Leidos Holdings LDOS has an Earnings ESP of +4.46% and a Zacks Rank #2.

General Dynamics GD has an Earnings ESP of +1.98% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

L3Harris Technologies LHX has an Earnings ESP of +0.43% and a Zacks Rank #3.

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The Boeing Company (BA) : Free Stock Analysis Report

General Dynamics Corporation (GD) : Free Stock Analysis Report

Leidos Holdings, Inc. (LDOS) : Free Stock Analysis Report

L3Harris Technologies Inc (LHX) : Free Stock Analysis Report

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