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Will Solid Defense Deliveries Aid Boeing's (BA) Q1 Earnings?

Zacks Equity Research

The Boeing Company’s BA Defense, Space & Security (BDS) segment is expected to report solid revenue growth in first-quarter 2019, courtesy of the accounting realignment that management started since January this year. Notably, reduced expenses related to the KC-46 program are likely to favor the unit’s bottom line.

Scheduled for release on Apr 24, Boeing’s upcoming quarterly results should duly reflect these factors.

Accounting Realignment to Aid the Top Line

Historically, the company witnessed an increased order flow for its varied defense products. This, in turn, has been providing a solid boost to its defense segment’s revenues. We expect first-quarter results to reflect similar top-line improvement for this particular segment.

Furthermore, in January 2019, Boeing realigned its military derivative aircraft contracts. Following the realignment, revenues and costs associated with military derivative aircraft, which were previously reported under both the commercial and defense units, will now be recorded in the BDS segment. As a result, the BDS unit is anticipated to deliver solid performance in the first quarter. The Zacks Consensus Estimate for Boeing’s defense unit’s revenues is pegged at $6,411 million, indicating growth of 11.3% from the year-ago reported figure.

The Boeing Company Price and EPS Surprise

The Boeing Company Price and EPS Surprise | The Boeing Company Quote

Will KC-46 Delivery Boost Q1 Earnings?

Boeing has been experiencing high costs associated with the certification and subsequent launch of its KC-46 Tanker program over the past couple of quarters. However, since the beginning of the first quarter, the company is actively delivering these tankers. So, we may expect these expenses to fade away gradually, leading to lower costs in the to-be-reported quarter.

Moreover, the company is optimistic about registering higher sales volume for its defense products. These, in turn, should enable the segment to eventually register solid earnings growth in the quarter to be reported. In sync with this, the Zacks Consensus Estimate for BDS unit’s earnings is pegged at $663 million, suggesting a 2.2% rise from the year-ago reported figure.

Deliveries – A Positive

Boeing announced first-quarter 2019 delivery figures on Apr 9, which reflected a 140% solid surge in defense shipments compared with the previous year. Notably, the company’s defense deliveries totaled 60 in the first quarter, up from 25 dispatched in the year-ago period. Such impressive delivery figures are expected to significantly boost the defense segment’s top line.

What the Zacks Model Unveils

Our proven model does not conclusively show that Boeing is likely to beat earnings in the first quarter. This is because a stock needs to have both — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for this to happen. Zacks Rank #4 (Sell) or 5 (Strong Sell) stocks are best avoided, especially if they have a negative Earnings ESP. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Boeing has an Earnings ESP of 0.00% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks That Warrant a Look

Here are some companies in the Aerospace sector that you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Raytheon Company RTN is expected to report first-quarter 2019 results on Apr 25. The company has an Earnings ESP of +0.54% and a Zacks Rank #2.

General Dynamics Corp. GD is anticipated to report first-quarter 2019 results on Apr 24. The company has an Earnings ESP of +1.35% and a Zacks Rank #3.

Huntington Ingalls Industries, Inc. HII is expected to report first-quarter 2019 results on May 2. The company has an Earnings ESP of +1.93% and a Zacks Rank #3.

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Huntington Ingalls Industries, Inc. (HII) : Free Stock Analysis Report
 
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