It has been about a month since the last earnings report for Boeing (BA). Shares have added about 1.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Boeing due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Boeing Q2 Earnings Down Y/Y on Lower 737 Deliveries
Boeing incurred adjusted loss of $5.82 per share for second-quarter 2019 against the year-ago-quarter’s earnings of $3.33. This year-over-year downside was primarily on account of the $4.9 billion charge in relation to the grounding of 737 Max jets and its delayed delivery.
Excluding the one-time impact of $8.74 per share related to 737 Max issues, the company posted earnings of $2.92 per share. This compares favorable with the Zacks Consensus Estimate of earnings of $1.85.
Furthermore, the company incurred GAAP loss of $5.21 per share against earnings of $3.73 registered in the second quarter of 2018.
In the quarter under review, Boeing’srevenues amounted to $15.75 billion, which missed the Zacks Consensus Estimate of $17.98 billion by 12.4%. The top line also plunged 35% from the year-ago quarter’s figure of $24.26 billion. This decline was primarily on account of lower 737 deliveries.
Backlog at the end of second-quarter 2019 slipped to $474 billion from $487 billion at the end of first-quarter 2019.
Commercial Airplane: Revenues at this segment decreased 66% to $4.7 billion on account of lower 737 deliveries and a charge related to the 737 Max grounding. The segment incurred operating expenses of $5 billion against operating income of $1.8 billion in the year-ago quarter.
Boeing delivered 90 commercial planes during the quarter under review, down 54%.
Backlog for this segment remains healthy with over 5,500 airplanes valued at $390 billion.
Boeing Defense, Space & Security (BDS): This segment witnessed an 8% year-over-year improvement in revenues to $6.61 billion in the second quarter. The uptick was driven by higher volume across derivative aircraft, satellites, and weapons. Meanwhile, operating margin in the quarter expanded 850 basis points (bps) year over year to 14.7% on account of a gain on sale of property and lower cost growth on the KC-46 Tanker program.
Backlog at BDS was $64 billion, 31% of which comprised orders from international clients.
Global Services: Revenues at this segment improved 11% to $4.54 billion backed by higher volume for international government services including the acquisition of KLX Aerospace. Moreover, operating margin expanded 40 bps year over year to 15.1%.
Boeing Capital Corporation (BCC): This segment reported quarterly revenues of $75 million compared with $72 million registered in the year-ago quarter. Meanwhile, operating earnings summed $37 million, up from $24 million registered in the year-ago quarter.
At the end of second-quarter 2019, BCC's portfolio balance was $2.3 billion.
Boeing exited the second quarter with cash and cash equivalents of $9.17 billion, and short-term and other investments of $0.44 billion. At the end of 2018, the company had $7.64 billion of cash and cash equivalents, and $0.93 billion of short-term and other investments. Long-term debt amounted to $14.86 billion at the end of the reported quarter, up from $10.66 billion at 2018 end.
Boeing generated $2.20 billion of operating cash flow at the end of the second quarter, down 71.9% year over year. Free cash outflow totaled $1.01 billion at second-quarter 2019 end compared with $4.34 billion at the end of second-quarter 2018.
Due to the uncertainty regarding the timing and conditions related to the 737 MAX fleet’s return to service, Boeing has once again refrained from issuing its guidance for now.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -7.47% due to these changes.
Currently, Boeing has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Boeing has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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