Boeing (BA) Beats On Q2 Earnings, Raises '17 EPS Guidance

Aerospace giant, The Boeing Company (NYSE:BA) , reported adjusted earnings of $2.55 per share for second-quarter 2017, beating the Zacks Consensus Estimate of $2.32 by 9.9%. In the year-ago quarter, the company had incurred a loss of 44 cents.

On a GAAP basis, Boeing reported earnings of $2.89 per share against loss of 37 cents per share in the year-ago quarter.

Revenues

The company's revenues amounted to $22.74 billion in the reported quarter, missing the Zacks Consensus Estimate of $23.01 billion by 1.2%. The reported figure also declined 8.1% year over year.

Total Backlog

Backlog at the end of the second quarter was up to $482.2 billion from $479.5 billion at the end of first quarter. Reported backlog included $27 billion of net orders during the quarter.

Quarterly Segment Results

Commercial Airplane Segment: The segment saw a 10% decline in revenues to $15.71 billion. Operating margin for the quarter expanded 1560 basis points (bps) year over year to 10%.

Boeing reported commercial deliveries of 183 planes during the reported quarter, which was down due to lower 737, 777, 787 and 767 jet deliveries. Sequentially, the numbers reflected an 8.3% growth.

Delivery of the single-aisle 737 jet declined to 123 from 127 a year ago. This reduction was due to Boeing’s greater involvement in the production of a newer version of its most popular plane, the 737 MAX.

Shipments of the 777 and 787 Dreamliners were 21 and 33 compared with 28 and 38 in the year-ago period, respectively. The company delivered three 767 jets compared with four in the year-ago quarter. However, shipments of 747 were three compared with two in the year-ago period.

A look at Boeing’s second-quarter order details reveals that the company booked 183 net commercial orders (accounting for cancellations). This reflects an increase from the year-ago figure of 171. The figure included 95 orders for the 737, 64 for the 787, and 24 for the 777 jets.

Boeing Defense, Space & Security (BDS): The segment witnessed an approximate 4% year-over-year decrease in second-quarter revenues to $6.89 billion. Revenues at all of the three sub-segments – Boeing Military Aircraft (BMA) and Network & Space Systems (N&SS) and Global Services & Support (GS&S) – recorded year-over-year deterioration of 2.5%, 7.5% and 3.2%, respectively.

Operating margin for the quarter expanded 460 bps to 12.9%.

Backlog at BDS was $58 billion, 37% of which comprised orders from international clients.

In the defense and space business, Boeing’s deliveries totaled to 45 in the second quarter, in line with the year-ago figure. However, the reported figure was up from 42 in the preceding quarter. Total deliveries consisted of 17 AH-64 Apache (NYSE:APA) helicopters (both new and remanufactured) and 11 Chinook helicopters (new and renewed). In addition, the company delivered six F/A-18s, five P-8 models, four F-15s, and two Commercial and Civil Satellites.

Boeing Capital Corporation (BCC): Boeing Capital reported quarterly revenues of $72 million, compared with $84 million in the year-ago quarter. The segment’s earnings were $25 million compared with $18 million a year ago.

At the end of the second quarter, BCC's portfolio balance was $3.9 billion.

Financial Condition

Boeing exited the second quarter with cash and cash equivalents of $8.74 billion and short-term investments of $1.59 billion. At year-end 2016, the company had $8.80 billion of cash and cash equivalents and $1.23 billion of short-term investments. Long-term debt was $10.06 billion in the second quarter, up from $9.57 billion at 2016 end.

Boeing generated $7.04 billion of operating cash flow in the second quarter, up 57.8% year over year. Free cash flow was $4.51 billion in the second quarter compared with free cash of $2.52 billion in the year-ago quarter.

Guidance

Boeing’s adjusted or core earnings per share expectation for 2017 are in the range of $9.80–$10.00, up from the prior guided range of $9.20–$9.40. GAAP earnings are now projected to be in the range of $11.10–$11.30 per share compared with the previous range of $10.35–$10.55.

The company still expects 2017 revenues in the range of $90.5−$92.5 billion.

Commercial Airplanes' 2017 delivery expectations are reiterated in the band of 760−765 airplanes with revenues projected in the range of $62.5−$63.5 billion. Operating margin is now anticipated to be more than 10.0% compared with the prior guidance in 9.5–10.0% band.

The company reaffirmed its projection of 2017 defense revenues in the $28.0–$29.0 billion range with operating margin of approximately 11.5%.

Boeing Capital Corp. expects the aircraft finance portfolio to remain stable. The company still anticipates its segment revenues to be approximately $0.3 billion.

Boeing's 2017 R&D forecast has been reiterated at approximately $3.6 billion. Capital expenditures for 2017 are now expected to be approximately $2.0 billion compared with the previous guidance of $2.3 billion.

Zacks Rank

Boeing currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

At Its Peers

Lockheed Martin Corp. (NYSE:LMT) reported second-quarter 2017 earnings from continuing operations of $3.23 per share, beating the Zacks Consensus Estimate of $3.10 by 4.2%. Earnings also surpassed the year-ago period’s bottom-line figure by 10.2%.

Textron Inc. (NYSE:TXT) reported second-quarter 2017 adjusted earnings from continuing operations of 60 cents per share, beating the Zacks Consensus Estimate of 55 cents by 9.1%.

Northrop Grumman Corp. (NYSE:NOC) reported second-quarter 2017 earnings of $3.15 per share, beating the Zacks Consensus Estimate of $2.84 by 10.9%. Reported earnings were also up 10.5% from $2.85 recorded in the year-ago quarter.

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