What Investors Need to Know About Boeing's Earnings

Company beats earnings expectations, thanks to solid performances across all segments

Author's Avatar
Oct 31, 2017
Article's Main Image

U.S. aerospace behemoth Boeing (BA, Financial) reported third-quarter results that surpassed estimates, thanks to strong deliveries, profitable product mix and strong execution.

During the quarter, the aircraft giant launched its new business segment called Boeing Global Service. This segment provides cost-effective service solutions and strong support to commercial, defense and space aircraft. Given the phenomenal run the aircraft manufacturer had in the third quarter, the company gave optimistic guidance for the fourth quarter. In a press release, the company said:

“We achieved a number of key milestones in the quarter with the delivery of a record 202 commercial airplanes, including 24 737 MAXes as we continue the smooth introduction of that airplane. On the defense side, we booked $6 billion in new orders, including an initial contract award for the Ground Based Strategic Deterrent program and an award from the U.S. Navy for 14 F/A-18 Super Hornet aircraft.”

By the numbers

The company’s earnings per share (EPS) for the quarter came in at $2.72 compared to an estimate of $2.66. On the other hand, quarterly revenue stood at $24.3 billion which again was higher than the estimation of $23.9 billion. But the company’s stocks plunged more than 3% post the third-quarter earnings due to low revenue in two major business segments – commercial airplane sector and defense, space and security units. Revenue in these two sectors decreased 1% and 5%.

The company generated operating cash flow of $3.4 billion during the quarter due to timely receipts and expenditures. Overall backlog at the end of the quarter came in at $474 billion. Of this, the company won net orders of $16 billion during the third quarter.

Boeing’s balance of operating cash flow at the end of the quarter came in at $3.4 billion. The company is paying special attention to make its cash generation grow stronger. Total pension expense was $100 million compared with $453 million reported a year ago. Cash and investments in marketable securities amounted to $10 billion in the quarter.

Performance across three segments

Revenue at the commercial airplane segment was $15 billion for the quarter on account of planned production and timely deliveries. The segment reached record deliveries in the third quarter. It won net orders (after adjustments) of 117 in the third quarter. As per Boeing’s website, the company received net orders of 538 airplanes through Oct. 24. Of the total orders, 390 are for the 737 family, 83 for the 787 Dreamliner and 53 for the 777 family. Backlog at commercial airplane stood at 5,700 airplanes worth $412 billion.

120441953.jpg
Source: www.boeing.com

The Defense, Space and Security (BDS) sector recorded third-quarter revenue of $5.5 billion. This segment’s backlog currently stands at $46 billion of which approximately $16 billion are orders from international customers.

Revenue from the Global Services amounted to $3.6 billion. During the quarter, Global Services had entered into a contract with Defense Logistics Agency for supplying F/A-18 E/F spare parts. Besides, there were more than 40 commercial airline operators who contracted with Global Services to avail some essential services. The key here for Boeing is to make sure that all three segments work in tandem to deliver better results.

Positive outlook

Based on the performance delivered in the third quarter, the aerospace giant came out with full-year projections with earnings expected to range from $11.20 to $11.40, higher than its previous estimation of $11.10 to $11.30. Boeing’s cash flow projections have increased to $12.5 billion from its previous guidance of $12.25 billion due to solid performance across all the business segments. Boeing remains committed to improving its operating cash flows further, enabling it to reward its shareholders.

Disclosure: I do not hold any position in the stock mentioned in this article.