In the first quarter of 2012,
The Boeing Company
), soaring on higher deliveries of commercial airplanes, posted
strong numbers. In the reported quarter the company posted
operating earnings per share (
), excluding special items, of $1.11, beating both the Zacks
Consensus Estimate of 96 cents and the year-ago EPS of 78 cents.
The company's strong numbers came from higher commercial plane
deliveries which more than offset a tepid quarter for defense.
On a reported basis, Boeing reported quarterly EPS of $1.22 per
share versus 78 cents in the year-ago quarter. The 11 cents
difference between reported and operating earnings, during the
reported quarter, was owing to a reduction in a litigation-related
On the revenue front, higher airplane deliveries pulled up the
quarterly revenue year over year by 30% to $19.4 billion, above the
Zacks Consensus Estimate of $18.3 billion.
Boeing's Commercial Airplane segment saw a 32% rise in
deliveries to 137 units in the reported quarter. As a result,
Commercial Airplanes revenue increased by 54% to $10.9 billion on
higher delivery volume and mix. In the reported quarter the company
delivered 99 units of 737 series and 20 units of 777 series
airplanes versus deliveries of 87 and 13, respectively, in the
year-ago period. The company also delivered 7 units of 767 (4 in
the year-ago period), 6 units of 747 and 5 units of 787. In the
year-ago period no 747 and 787 were delivered.
Operating margin rose 270 basis points to 9.9%, reflecting the
higher deliveries and lower Research & Development expenditure.
This was partially offset by the dilutive impact of initial 787 and
747-8 deliveries and higher period costs.
Commercial Airplanes booked 412 net orders during the reported
quarter. Backlog at the end of the reported period remains
strong with more than 4,000 airplanes valued at a record $308
Boeing Defense, Space & Security
Boeing Defense, Space & Security segment witnessed an 8%
rise in its quarterly revenue to $8.2 billion. Of these
sub-segments Boeing Military Aircraft (
) and Global Services & Support (GS&S) witnessed a top-line
climb of 27% and 13%, respectively. The upside was primarily due to
initial revenue for the F-15 Saudi Arabia contract and higher
volume in integrated logistics. Only the sub-segment, Network &
Space Systems (N&SS) recorded a 23% fall in revenues. N&SS
revenue decreased owing to lower volume on Brigade Combat Team
Quarterly operating margin rose by 20 basis points to 9.0%. This
was due to strong execution across various GS&S programs and
improved performance in integrated logistics in BMA. However, this
was partially offset by lower margin at the N&SS programs. In
the N&SS sub-segment, margin fell owing to lower volume and
Backlog at Defense, Space & Security segment increased 20%
to $72 billion on F-15 and C-17 order activity in the quarter,
bringing the backlog to more than two times the unit's projected
Boeing Capital Corporation (BCC)
Boeing Capital Corporation reported quarterly revenues of $125
million compared with $143 million in the year-ago quarter. The
segment registered earnings of $38 million compared with earnings
of $52 million in the year-ago period. At quarter-end, BCC's
portfolio balance declined to $4.2 billion, down from $4.3 billion
at the beginning of the year on portfolio run-off and asset
Boeing ended the quarter with cash and cash equivalents of $6.7
billion and short-term investments of $3.8 billion. At fiscal-end
2011, the company had $10.0 billion in cash and cash equivalents
and $1.2 billion of short-term investments. The company generated
$837 million of cash from operating activities in the reported
quarter, compared with $953 million used in the year-ago period.
Long-term debt decreased to $8.8 billion at the end of the reported
period from $10.0 billion at the end of fiscal 2011.
Boeing enjoys 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 raised its fiscal 2012 earnings per share to a range of
$4.15-$4.35 versus its earlier guidance range of $4.05-$4.25.
Revenue guidance for 2012 is reaffirmed to be between $78 billion
and $80 billion. Commercial Airplanes' 2012 deliveries are expected
to be between 585 and 600 airplanes and are already sold out. This
includes an expected 70 to 85 787 and 747-8 deliveries. Commercial
Airplanes' 2012 revenue is expected to be between $47.5 billion and
$49.5 billion with operating margins between 8.5% and 9%. Also
recent media speculation puts Boeing as the frontrunner in the $15
billion aircraft order from
United Continental Holdings Inc.
In the near term however we expect deliveries to take a hit,
specially the 787 Dreamliner, owing to the April tornado in
Wichita, Kansas disrupting production for more than a week at a
Spirit AeroSystems Holdings Inc.
) facility there. Spirit AeroSystems is one of the main suppliers
to Boeing's commercial airplanes business, specially the nose
section for the 787 Dreamliner and fuselage work on other Boeing
In the defense space, the company also secured contracts like
the domestic and international C-17 Globemaster III orders; and a
performance-based logistics contract for the sustainment of the
Republic of Korea Air Force fleet of F-15s.
However, the threat of defense cutbacks will loom over the
company going forward. Overall, Boring expects defense revenue for
2012 to be between $30.0 billion and $30.5 billion with operating
margin greater than 9%. The sentiment is echoed in the
outlook provided by defense peer
General Dynamics Corporation
) which also released its numbers today. Going forward, General
Dynamics does not expect significant new additions to its order
backlog barring its Information Systems and Technology
Boeing Capital Corporation expects that its aircraft finance
portfolio will continue to decline in 2012.
Boeing's 2012 R&D forecast is between $3.3 billion and $3.5
billion. Capital expenditures for 2012 are expected to be
approximately $2.0 billion.
Boeing currently retains a Zacks #3 Rank, which translates into
a short-term Hold rating. Considering the fundamentals, we are
maintaining our Neutral recommendation on the stock. This is in
sync with other aerospace and defense behemoths. A clearer picture
will emerge tomorrow when the big daddy of defense
Lockheed Martin Corporation
) along with
) comes out with their versions of the first quarter.
BOEING CO (
): Free Stock Analysis Report
GENL DYNAMICS (
): Free Stock Analysis Report
LOCKHEED MARTIN (
): Free Stock Analysis Report
RAYTHEON CO (RTN): Free Stock Analysis Report
SPIRIT AEROSYS (SPR): Free Stock Analysis
UNITED CONT HLD (UAL): Free Stock Analysis
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