Earnings Preview: The Boeing Company - Analyst Blog

By Zacks Equity Research,

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Aerospace & defense behemoth, The Boeing Company ( BA ) is all set to report its first quarter 2012 results before the start of trading on April 25, 2012. The Zacks Consensus Estimate for the first quarter of 2012 is 95 cents (year-over-year increase of 19.8%) on revenues of $18,283 million (year-over-year increase of 20.2%).

Fourth Quarter Recap

Boeing posted fourth quarter 2011 adjusted earnings per share ( EPS ) of $1.31, beating both the Zacks Consensus Estimate of $1.02 and year-ago EPS of $1.06. 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 $1.84 versus $1.56 in the year-ago quarter. The 52 cents difference between reported and operating earnings, during the quarter, was owing to the effects of a favorable tax settlement.

On the revenue front, higher airplane deliveries pulled up the quarterly revenue year-over-year by 18% to $19.6 billion, above the Zacks Consensus Estimate of $19.3 billion.

(Read our full coverage on this earnings report: Boeing Tops on Higher Deliveries ).

Agreement of Estimate Revisions

Over the last 7 days, 2 of the 19 analysts covering Boeing for the first quarter of 2012 have upped their earnings estimates with no downward movement. We believe that the recent upward bias for the first quarter comes on the heel of media speculation putting Boeing ahead in the $15 billion aircraft order from United Continental Holdings Inc. ( UAL ).

Prior to that, the company over the last 30 days has witnessed mixed reaction among analysts regarding estimate revisions. In the aforementioned period Boeing witnessed 6 upward moves on one hand negated by 5 downward revisions. The downward sentiments were triggered by a tornado in Wichita, Kansas disrupting production at Spirit AeroSystems Holdings Inc. ( SPR ). 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 airplanes. We feel this will invariably lead to lower delivery of Dreamliners in the near term.

The upward revisions are mainly attributed to production increases on all of the current models and resilience of the company. We must keep in mind that Boeing is the largest aircraft manufacturer in the world in terms of revenue, orders and deliveries, and one of the largest aerospace and defense contractors. Its revenue exposure is spread across more than 90 countries around the globe. Due to the continuing recovery of the global economy, demand for Boeing's Commercial Airplanes is benefiting from a steady improvement in passenger and freight traffic. To catch up with the expected rise in air traffic and to check fuel bills, airliners will need to replace older airplanes with new ones. The company is slated to benefit greatly from improving air traffic.

This has caused estimates for the second quarter of 2012 also to have an upward bias. Over the last 30 days, 5 analysts have upped their earnings estimates for the second quarter of 2012 with 2 downward movements.

As a result, the fiscal 2012 earnings estimate of $4.47 composed of 23 estimates witnessed 3 upward revisions compared with a lone downward revision over the last 30 days. The cautious stance of analysts on their 2012 verdict on Boeing was due to uncertainty regarding the extent of U.S. budgetary pressures on Boeing defense programs.

Magnitude of Estimate Revisions

Given the positive sentiment in earnings estimate revisions witnessed over the last month, earnings estimates for the first and second quarters of 2012 have gone up by 2 cents and 1 cent to 95 cents and $1.08, respectively. Earnings estimate for fiscal 2012 has fallen by a cent to $4.47 per share over the last 30 days.

Surprise History

Boeing has consistently surpassed earnings estimates in the last four quarters. The company recorded a maximum positive surprise of 31.53% in the third quarter of 2011. On an average, the earnings surprise was 25.03%.

Our Recommendation

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 Boeing along with its other defense peers like Northrop Grumman Corporation ( NOC ) and General Dynamics Corporation ( GD ) comes out with their versions of the first quarter of 2012.

BOEING CO ( BA ): Free Stock Analysis Report
GENL DYNAMICS ( GD ): Free Stock Analysis Report
NORTHROP GRUMMN ( NOC ): Free Stock Analysis Report
SPIRIT AEROSYS ( SPR ): Free Stock Analysis Report
UNITED CONT HLD (UAL): 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 Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
Referenced Stocks: BA , EPS , GD , NOC , SPR

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