Will Poor 737 Deliveries Hurt Boeing (BA) in Q3 Earnings?
The Boeing Company’s BA commercial airplane business is expected to have benefited from increased 787 delivery figures and cost management efforts in the third quarter of 2023.
However, the company’s third-quarter earnings, scheduled for release on Oct 25, are likely to reflect the impact of abnormal costs related to the 777X program and higher R&D expenses.
Click here to know how the company’s overall quarterly performance is likely to have been.
Will Poor 737 Jet Deliveries Impact Growth?
Thanks to a steady recovery in air traffic (both domestic and international), improved delivery figures for Boeing’s 787 jets were observed in the soon-to-be-reported quarter. The aerospace giant delivered 19 787 Dreamliner jets in the third quarter compared with nine jets in the year-ago period. Its 777 delivery figure also reflected a year-over-year improvement of 33.3%.
The Boeing Company Price and EPS Surprise
The Boeing Company price-eps-surprise | The Boeing Company Quote
However, such significant deliveries of 787 and 777 failed to boost the company’s overall commercial delivery, due to a 20.5% decline in the 737 delivery. Notably, BA’s third-quarter commercial shipments fell 6.3% in the third quarter compared with the prior-year quarter’s level.
Nevertheless, considering the fact that the price of both 777 and 787 is more than double that of narrowbody 737 jets, the higher delivery figures for the widebody jets can be expected to have boosted the Commercial Airplane (BCA) segment’s overall revenues in the to-be-reported quarter.
The top-line estimate for Boeing’s commercial business segment is pegged at $7,255 million, implying a solid 15.8% improvement from the year-ago quarter’s reported figure.
Earnings Expectations
Since the company continues to manufacture its 787 Dreamliner at an abnormally low rate and pause production for its 777X program, consistent abnormal costs associated with these two jet programs are likely to have adversely impacted the BCA segment’s earnings.
Further, higher research and development expenditures on the 777X program and other product developments in the BCA unit might have hurt the segment’s earnings.
However, increasing 787 deliveries and consistent cost management efforts by the BCA team are likely to have contributed to this unit’s third-quarter bottom-line growth.
Moreover, the company has been steadily increasing production rates for some of its key commercial programs to meet the robust demand. This, in turn, might have bolstered its production efficiency, thereby aiding the segment’s overall bottom-line performance.
The third-quarter earnings estimate for BA’s commercial business segment is pegged at a loss of $524 million, indicating an improvement from the year-ago quarter’s reported loss of $643 million.
What the Zacks Model Unveils
Our proven model does not conclusively predict an earnings beat for Boeing this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. This 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 +0.61% 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 +0.67% 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 $5.77 per share, while that for sales is pinned at $9.67 billion.
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