Will Commercial Deliveries Drive Boeing's (BA) Q3 Earnings?

Leading aircraft manufacturer, The Boeing Co. (NYSE:BA) is set to release third-quarter 2017 results before the opening bell on Oct 25.

The company’s results in the to-be-reported quarter are anticipated to be primarily driven by constant contract wins and higher commercial deliveries. Meanwhile, lower defense deliveries are expected to reflect conflicting numbers.

Let's have a detailed look at the factors influencing Boeing’s quarterly results.

Slew of Contract Wins — Key Catalyst

Being largest aircraft manufacturer and one of the largest aerospace and defense contractors in the United States, Boeing enjoys a solid inflow of contracts from both Pentagon as well as foreign allies, courtesy its varied product offerings.

Markedly, the company received a number of orders for its commercial jets including a $2.16 billion order from Qatar Airways for two 747-8 Freighters and four 777-300ERs (extended range). Again, it announced that Turkish Airlines intends to purchase 40 787-9 Dreamliners, which are estimated to be valued at approximately $11 billion at list prices.

Among the defense contracts won in the third quarter, the significant ones include a $600 million contract to provide new preliminary design activity requirements for the Presidential Aircraft Recapitalization (PAR) program. Again, it won a contract worth $323.5 million to supply spare parts of F/A-18 A-F and F/A-18 aircraft. Boeing clinched a contract worth $222.5 million for eight CH-47F new build helicopters as well. Considering these defense orders, the Zacks Consensus Estimate of $7.6 billion showed 0.8% sales growth in Integrated Defense System segment.

Thus, it goes without saying that such steady inflow of orders will surely boost Boeing’s quarterly sales. Evidently, the Zacks Consensus Estimate for the company’s third-quarter sales growth is pegged at $24.06 billion, reflecting year-over-year increase of 0.7%.

Q3 Orders & Deliveries: A Mixed Bag

Boeing’s third-quarter deliveries showed a 7.4% improvement year over year in commercial shipments. However, defense shipments were 12% lower than the year-ago figure. The year-over-year improvement in commercial deliveries was primarily driven by higher deliveries of 737 model. Boeing’s other models 777, 787 and 767 jets, registered marginal year-over-year drop in deliveries. In the reported quarter, the company delivered 202 airplanes.

Boeing’s third-quarter order details reveal that the company booked 127 net commercial orders (accounting for cancellations). This reflects a drop from the year-ago figure of 150. At the end of third quarter, the backlog of commercial airplanes touched 5,679.

In the defense and space business, Boeing’s deliveries totaled 44 in the third quarter compared with 50 in the year-ago quarter.

Operating Profit: A Positive Picture

During its second-quarter earnings call, Boeing raised its total operating profit guidance for 2017. Thanks to the huge number of commercial orders that the company won, the Zacks Consensus Estimate has predicted higher operating numbers for the third quarter. Commercial Airplanes segment’s operating profit is now expected to be $1,756 million, up 10% year over year. Also, Integrated Defense System segment's operating profit expectation of $874 million reflects year-over-year growth of 11.5%.

Boeing Company (The) Price and EPS Surprise

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

Earnings Whispers

Our proven model does not conclusively show an earnings beat for Boeing this 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. This is not the case here, as you will see below:

Zacks ESP: Boeing has an Earnings ESP of 0.00% as the Most Accurate estimate and the Zacks Consensus Estimate both are pegged at $2.66. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Boeing’s carries Zacks Rank #2, which increases the predictive power of ESP. However, the company’s 0.00% ESP makes surprise prediction difficult.

Note that we caution against stocks with Zacks Ranks #4 or 5 (Sell rated) going into an earnings announcement.

Stocks that Warrant a Look

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

General Dynamics Corp. (NYSE:GD) is slated to report quarterly results on Oct 25. The company has an Earnings ESP of +0.37% and a Zacks Rank #3.

Leidos Holdings, Inc. (NYSE:LDOS) to report quarterly results on Nov 2. The company has an Earnings ESP of +3.75% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Huntington Ingalls Industries, Inc. (NYSE:HII) is slated to report quarterly results on Nov 8. The company has an Earnings ESP of +2.04% and a Zacks Rank #2.

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