Will Boeing's (BA) Space Programs Drive Its Q3 Earnings?

·4 min read

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

Boeing’s third-quarter 2021 results are scheduled to be released on Oct 27.
Click here to know how the company’s overall Q3 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 various products. This, in turn, has been consistently boosting the BDS unit’s backlog.

Amid the uncertainties caused by the COVID-19 pandemic, the BDS unit kept up with its usual trend of securing some multi-million-dollar as well as a few multi-billion-dollar orders during the third quarter. These include a $3.5 billion contract to offer sustainment services for the C-17 Globemaster III jets and a $1.6 billion contract involving the Minuteman III Intercontinental Ballistic Missile (ICBM). We expect the upcoming results to reflect this order count in terms of a solid backlog figure for the BDS unit.

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

Revenue Expectations

Boeing’s third-quarter 2021 defense delivery figures reflected no change from the year-ago period.

In the quarter, its defense deliveries totaled 37, which came in line with the year-ago period’s reported figure. Therefore, any notable change in the defense segment’s revenues in the soon-to-be-reported quarter is unlikely.

On the other hand, solid revenues from space programs like the Space Launch System (SLS) are expected to have boosted the overall Q3 performance of the BDS unit.

The Zacks Consensus Estimate for the company’s defense unit revenues, pegged at $7,190 million, indicates an increase of 5% from the year-ago quarter’s reported figure.

Earnings Prospects

COVID-induced business disruptions and production inefficiencies hampered the BDS unit’s operating margin last year. However, we witnessed a reversal of this trend in the first quarter, with the absence of charges related to the KC-46A program being a primary catalyst. We expect a similar positive trend to have boosted the third-quarter margin of the BDS unit when compared with the year-ago period.

Moreover, growth opportunities in its defense business are also expected to have aided Boeing’s operating margin performance, which along with solid revenue growth projections, make us optimistic about the BDS unit’s third-quarter earnings performance in the soon-to-be-reported quarter.

The Zacks Consensus Estimate for the company’s defense unit earnings, pegged at $781 million, indicates an improvement of 24.4% 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 currently has an Earnings ESP of -76.97% 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 a couple of defense companies you may want to consider, as these have the right combination of elements to post an earnings beat this season:

Transdigm Group TDG has an Earnings ESP of +0.36% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

CAE Inc CAE has an Earnings ESP of +9.46% and a Zacks Rank #3.

Huntington Ingalls HII has an Earnings ESP of +3.59% and a Zacks Rank #2.

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