In the fourth quarter of 2012,
The Boeing Company
) soaring on higher deliveries of commercial airplanes posted
strong operating EPS (excluding special items) of $1.46, beating
the Zacks Consensus Estimate of $1.19. However, this came below
the year-ago EPS of $1.92. The company's strong numbers came from
higher commercial planes deliveries which more than offset a
tepid quarter for defense.
On a reported basis, Boeing reported quarterly EPS of $1.28 per
share versus $1.84 in the year-ago quarter. The 18-cent
difference between reported and operating earnings, during the
reported quarter, was owing to the effects of an unallocated
Full year 2012 operating EPS (excluding special items) came in at
$5.88, above the Zacks Consensus Estimate of $5.00 and full year
2011 earnings of $5.79. On a reported basis, earnings came in at
$5.11 in 2012 versus $5.34 in 2011.
On the revenue front, higher airplane deliveries pulled up the
quarterly revenue year over year by 14% to $22.3 billion, in line
with the Zacks Consensus Estimate. Full-year 2012 revenue rose
19% to $81.7 billion, moderately above the Zacks Consensus
Estimate of $81.6 billion.
Commercial Airplane segment
Boeing's Commercial Airplane segment in the reported quarter saw
a 29% rise in deliveries to 165 units. As a result, Commercial
Airplanes revenue increased by 32% to $14.2 billion on higher
delivery volume and mix. In the reported quarter the company
delivered 10 747 series and 23 787 series airplanes versus 9 and
2 deliveries, respectively, in the year-ago period.
The company also delivered a higher number of 737 (105 versus
91 units) and 777 airplanes (21 versus 20). However, 767
deliveries were constant at 6 units in both the reported and
Operating margin fell 30 basis points to 8.9%, reflecting the
dilutive impact of initial 787 and 747-8 deliveries and higher
period costs. This was partially offset by higher volume and
lower Research & Development expenditure.
Commercial Airplanes booked 394 net orders during the reported
quarter. Backlog at 2012 end remained strong with more than
4,400 airplanes valued at a record $319 billion.
Boeing Defense, Space & Security
Boeing Defense, Space & Security segment witnessed a 2% fall
in its quarterly revenue to $8.3 billion. Of these sub-segments
only Boeing Military Aircraft (BMA) witnessed a top-line climb of
5%. However both the Global Services & Support (GS&S) and
Network & Space Systems (N&SS) registered fall of 11% and
Quarterly operating margin shrunk by 120 basis points to 9.0%.
This was due to lower margins in its two sub-segments. BMA margin
decreased due to delivery mix while N&SS margin fell due to
lower earnings on Ground-based Midcourse Defense and several
satellite programs. However this was partially offset by GS&S
which posted higher margins owing to improved performance in
integrated logistics programs.
Backlog at Defense, Space & Security was $71.0 billion, more
than two times the projected 2013 revenue.
Boeing Capital Corporation (BCC)
Boeing Capital Corporation reported quarterly revenues of $116
million compared with $104 million in the year-ago quarter. The
segment digested a loss of $20 million in both the reported and
the year-ago period. At 2012 end, BCC's portfolio balance was
$4.1 billion, flat versus the beginning of the year.
Boeing ended 2012 with cash and cash equivalents of $10.3 billion
and short-term investments of $3.2 billion. At year-end 2011, the
company had $10.0 billion in cash and cash equivalents and $1.2
billion of short-term investments.
The company generated more than $7.5 billion of cash from
operating activities in 2012, compared with approximately $4.0
billion generated in 2011. Long-term debt decreased to $9.0
billion at the end of the reported period from $10.0 billion at
the end of 2011.
Boeing expects its full-year 2013 GAAP earnings in the range of
$5.00-$5.20 per share, and adjusted earnings of $6.10-$6.30 per
share. Revenue for 2013 is expected to be between $82 billion and
Commercial Airplanes' 2013 deliveries are expected to be
between 635 and 645 airplanes. This includes more than 60 units
of 787 deliveries. Commercial Airplanes' 2013 revenue is expected
to be between $51 billion and $53 billion with operating margin
of approximately 9.5%.
In the defense space, the company also secured big contracts like
13 F/A-18 aircraft for U.S. Navy; Space Launch System (SLS) for
NASA; the C-17 Globemaster III Integrated Sustainment Program
from the U.S. Air Force; and a contract to upgrade 68 F-15s for
an international customer. However, the threat of defense
cutbacks will loom over the company going forward. Overall, the
company expects defense revenue for 2013 to be between $30.5
billion and $31.5 billion with operating margin greater than 9%.
Boeing Capital Corporation expects that its aircraft finance
portfolio will continue to decline in 2013, as new aircraft
financing of less than $0.5 billion is expected to be lower than
the normal portfolio runoff through customer payments and
Boeing's 2013 R&D forecast is approximately $3.4
billion. Capital expenditures for 2013 are expected to be
between $2.3 billion and $2.5 billion.
Boeing has a unique position as the largest aircraft manufacturer
in the world in terms of revenues, orders and deliveries, and is
one of the largest aerospace and defense contractors in the
world. Besides, its revenues are spread across more than 90
countries around the globe.
Boeing's presence in the two businesses of commercial airplanes
and defense insulates the performance of the company from U.S.
defense budget shock waves that are currently affecting all
defense players across the board.
However recently on Jan 16, the Federal Aviation Administration
("FAA") issued an airworthiness directive that resulted in all
in-service 787s temporarily ceasing operations. The pile of
dominos started tumbling from Japan when a 787 Dreamliner of
All Nippon Airways
) made an emergency landing at Takamatsu airport in Japan. The
Dreamliner was forced to land after an in-flight battery incident
of smoke appearing in the plane's cockpit.
As of now, while production continues on the 787, the company
is suspending deliveries until clearance is granted by the FAA
following ongoing investigation. Boeing currently retains a Zacks
Rank #3, which translates into a short-term Hold rating.
(ALNPY): ETF Research Reports
BOEING CO (BA): Free Stock Analysis Report
ROCKWELL COLLIN (COL): Free Stock Analysis
PRECISION CASTP (PCP): Free Stock Analysis
To read this article on Zacks.com click here.
The fate of the Dreamliner would affect other aerospace players
Rockwell Collins Inc.
Precision Castparts Corporation
) who have a considerable stake in the airplane as suppliers.