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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