Boeing Tops Earnings, Deliveries Climb - Analyst Blog

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Aerospace giant The Boeing Company ( BA ) reported stellar second quarter 2013 results, attributable to solid performance across the company's businesses. Its adjusted second quarter 2013 earnings came in at $1.67 per share, beating the Zacks Consensus Estimate of $1.58 by 5.7% as well as the year-ago profit of $1.48 by 12.8%.

The company's strong numbers came from solid operating performance fueled by higher aircraft deliveries and lower 787 Dreamliner production costs.

Total revenue was $21,815.0 million, up 9% from $20,005 million in the second quarter 2012 and ahead of the Zacks Consensus Estimate of $21,067 million.

Backlog also increased to a record $410.0 billion from $392.0 billion a year ago. Reported backlog included $40 billion of net orders during the quarter.

Segment Results

Commercial Airplane Segment

Boeing's deliveries in the Commercial Airplane segment boosted 13% year over year to 169. The segment saw a 15% increase in revenue to $13,624.0 million on higher delivery volume.

In the second quarter, the 737 model continued to be the pillar of Boeing's strength in the commercial airplane sector with deliveries of 116 airplanes, followed by its 777 model with 23 deliveries. Both these models continue to perform better than competing models owing to their fuel efficiency and lower operating costs.

In the year-earlier period, the company delivered 109 units of the 737 and 22 units of the 777 model. It also delivered 16 787s and an additional Dreamliner under a short-term financing agreement with Air India Ltd.

Operating margin expanded 50 basis points (bps) to 10.7% on the back of lower research and development (R&D) expenses and higher deliveries.

Boeing won net orders for 481 planes in the Jun 2013 quarter.  Backlog at second quarter 2013 end remained strong with more than 4,800 airplanes valued at a record $339 billion.

Boeing Defense, Space & Security (BDS)

Boeing Defense, Space & Security segment witnessed a marginal fall in its quarterly revenue to $8,186.0 million. Of the sub-segments, Network & Space Systems (N&SS) and the Global Services & Support (GS&S) witnessed a top-line climb of 5% and 3%, respectively. However, Boeing Military Aircraft (BMA) registered a decline of 4%.

Quarterly operating margin climbed 40 bps to 9.5%.

Backlog at Defense, Space & Security stood at $71.0 billion, 37% of which comprised orders from international clients.

Boeing Capital Corporation (BCC)

Boeing Capital Corporation reported quarterly revenues of $104.0 million compared with $113.0 million in the year-ago quarter. The segment witnessed a 51.3% drop in its earnings from operations valued at $19 million in the reported quarter.

At the end of second quarter 2013, BCC's portfolio balance was $4.1 billion.

Financial Condition

Boeing ended the second quarter with cash and cash equivalents of $8,694.0 million and short-term investments of $5,631.0 million. At year-end 2012, the company had $10,341 million in cash and cash equivalents and $3,217 million of short-term investments. Long-term debt stood at $8,695 million in the reported quarter (versus $8,973 million at 2012 end) with a debt-to-capitalization ratio of 53.3%.

The company generated $3,467 million of cash from operating activities in the second quarter, compared with $908 million generated in the same period last year.

Guidance

Boeing boosted its full-year 2013 GAAP earnings guidance to the range of $5.10-$5.30 per share from its previous expectation of $5.00-$5.20. The adjusted earnings guidance was raised to $6.20-$6.40 per share from $6.10-$6.30 earlier. The company also lifted its top-line expectation to the range of $83-$86 billion from the previous $82-$85 billion.

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 in a band of $51 billion to $53 billion with operating margin of greater than 9.5%.

Although the threat of defense cutbacks will loom over the company going forward, the company still increased its defense revenue target for 2013 to a range of $31.5 billion to $32.5 billion with operating margin maintained at the level of more 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 depreciation.  

Boeing's 2013 R&D forecast is approximately $3.3 billion. Capital expenditures for 2013 are expected to be $2.3 billion.  

Zacks Rank

Boeing currently retains a Zacks Rank #2 (Buy).

Although Boeing is facing hiccups with back-to-back disappointing news, the company remains well on track with its robust backlog and deliveries. The defense and aerospace major even outpaced its rival, Airbus, in terms of deliveries made in the first six months of this year. Boeing delivered 306 jetliners during the first half of the year, 6.6% higher than the year-ago level.

At the Paris Air Show, Boeing secured 692 airplane orders, which will boost the company's future growth trajectory. Despite the technical issues with the 787 Dreamliner or the crashed 777 airplane, swelling orders and rising production schedule hint that this aerospace manufacturer is in for a multi-year run of steady revenue and profit growth.

At the Peers

Boeing's closest peer, Northrop Grumman Corp. ( NOC ) reported second quarter 2013 results before the opening bell today. Adjusted earnings per share of $1.97 easily surpassed the Zacks Consensus Estimate of $1.70 and the year-ago figure of $1.79.

Another peer, General Dynamics Corporation 's ( GD ) second-quarter 2013 operating earnings of $1.81 per share surpassed the Zacks Consensus Estimate of $1.63 by 11.0%. Earnings were also ahead of the year-ago figure by 4 cents.

Again, the world's largest stand-alone defense contractor, Lockheed Martin Corporation ( LMT ) posted second quarter 2013 earnings of $2.64 per share, comfortably surpassing the Zacks Consensus Estimate of $2.21 by 19.5%.



BOEING CO (BA): Free Stock Analysis Report

GENL DYNAMICS (GD): Free Stock Analysis Report

LOCKHEED MARTIN (LMT): Free Stock Analysis Report

NORTHROP GRUMMN (NOC): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: BA , BCC , BMA , GD , LMT

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