In the second quarter of 2012,
The Boeing Company
), registering strong core performance across its businesses,
posted strong numbers. In the reported quarter, the company posted
earnings per share (EPS) of $1.27 beating both the Zacks Consensus
Estimate of $1.11 and the year-ago EPS of $1.25.
The company witnessed 27% higher commercial airplane deliveries
while its defense business, showing resilience, clocked higher
revenues and strong margins in a difficult market environment.
On the revenue front, the company witnessed its quarterly revenue
rise 20.9% year over year to $20.0 billion, above the Zacks
Consensus Estimate of $19.4 billion.
Boeing's Commercial Airplane segment saw a 27% rise in deliveries
to 150 units in the reported quarter. As a result, Commercial
Airplanes revenue increased by 34% to $11.8 billion on higher
In the reported quarter, the company delivered 109 units of 737
series and 22 units of 777 series airplanes versus deliveries of 94
and 19, respectively in the year-ago period. The company also
delivered 6 units of 767 (5 in the year-ago period), 6 units of 747
and 6 units of 787. In the year-ago period, no 747 and 787
airplanes were delivered.
Operating margin fell 20 basis points to 10.2%, reflecting higher
period costs and the dilutive impact of 787 and 747-8 deliveries.
This was partially offset by the higher deliveries and lower
research & development (R&D) expenditure.
Commercial Airplanes booked 28 net orders during the reported
quarter. Backlog at the end of the reported period remains
strong with approximately 4,000 airplanes valued at a record $302
Boeing Defense, Space & Security
Boeing Defense, Space & Security segment witnessed a 7% rise in
its quarterly revenue to $8.2 billion. Among its sub-segments
Boeing Military Aircraft (BMA) and Global Services & Support
(GS&S) witnessed a top-line climb of 13% and 11%,
The upside for the two sub-segments was primarily attributable
to higher delivery volume and higher volume in integrated
logistics, respectively. Only its Network & Space Systems
(N&SS) sub-segment recorded a 9% fall in revenues. N&SS
revenue decreased owing to lower volume on Brigade Combat Team
Quarterly operating margin fell by 130 basis points to 9.1%. The
downside came from both the BMA and N&SS sub-segments, which
were affected owing to an inventory adjustment on A160 Hummingbird
unmanned aerial vehicle helicopter program and lower earnings at
United Launch Alliance, respectively.
United Launch Alliance is a joint venture of
Lockheed Martin Corporation
) and Boeing. However, this was partially offset by higher margin
at the GS&S sub-segment owing to improved performance in
maintenance, modification and upgrades.
Backlog at Defense, Space & Security segment remained at $72
billion, keeping the backlog to more than two times the unit's
projected 2012 revenue.
Boeing Capital Corporation (BCC)
Boeing Capital Corporation reported quarterly revenues of $99
million compared with $147 million in the year-ago quarter. The
segment registered earnings of $31 million compared with earnings
of $62 million in the year-ago period. At quarter-end, BCC's
portfolio balance declined to $4.1 billion, down from $4.2 billion
at the beginning of the reported quarter on portfolio run-off and
Boeing ended the quarter with cash and cash equivalents of $6.3
billion and short-term investments of $4.0 billion. At the start of
the reported quarter, the company had $6.7 billion in cash and cash
equivalents and $3.8 billion of short-term investments.
The company generated $1.7 billion of cash from operating
activities in the first half of 2012, compared with $643 million
generated in the year-ago period. Long-term debt decreased to $8.7
billion at the end of the reported period from $10.0 billion at the
end of 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 guidance to a
range of $4.40-$4.60 versus its earlier guidance range of
$4.15-$4.35. The company also raised its revenue guidance for 2012
to the range of $79.5 billion - $81.5 billion versus the earlier
range of $78.0 billion-$80.0 billion.
Commercial Airplanes' 2012 deliveries are expected to be between
585 and 600 airplanes, which 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 margin hovering around 9.0%.
BOEING CO (BA): Free Stock Analysis Report
LOCKHEED MARTIN (LMT): Free Stock Analysis
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In the defense space, the company expects defense revenue for 2012
to be between $31.5 billion and $32.0 billion versus its earlier
range of $30.0 billion and $30.5 billion with operating margin
greater than 9%.
Boeing Capital Corporation expects that its aircraft finance
portfolio will continue to decline in 2012.
Boeing's 2012 R&D expenditure 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.