Aerospace & defense behemoth,
The Boeing Company
) is all set to report its second quarter 2012 results before the
start of trading on July 25, 2012. The Zacks Consensus Estimate for
the second quarter of 2012 is $1.10 (year-over-year decrease of
11.6%) on revenues of $19,389 million (year-over-year increase of
BOEING CO (BA): Free Stock Analysis Report
ROCKWELL COLLIN (COL): Free Stock Analysis
LOCKHEED MARTIN (LMT): Free Stock Analysis
UNITED CONT HLD (UAL): Free Stock Analysis
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First Quarter Recap
Boeing posted first quarter 2011 adjusted earnings per share (EPS)
of $1.11, beating both the Zacks Consensus Estimate of 96 cents and
year-ago EPS of 79 cents. 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 $1.22 versus
78 cents in the year-ago quarter. The 11 cents difference between
reported and operating earnings, during the quarter, was owing to a
reduction in a litigation-related reserve.
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.
(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
second quarter of 2012 have upped their earnings estimates with 1
downward movement. We believe that the recent upward bias for the
first quarter comes on the heel of a strong show by the company at
the Farnborough International Airshow and pocketing of a $15
billion aircraft order from
United Continental Holdings Inc.
Prior to that, the company, over the last 30 days, has also
witnessed positive bias among analysts regarding estimate
revisions. In the aforementioned period Boeing witnessed 8 upward
moves versus a lone downward revision. The upward revisions are
mainly attributed to a strong 2012 Current Market Outlook released
by the company at the inception of July. In the outlook, the
company estimated the worldwide market for new commercial airplanes
to be $4.5 trillion in the next 20 years. Boeing's projection of
growth is based on the strength of the commercial aviation market,
recovery witnessed in world economies and strong demand for fleet
addition and replacement. Airline traffic is forecast to grow at a
5% annual rate over the next two decades, with cargo traffic
projected to grow at an annual rate of 5.2%.
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.
Estimates for 2012 however have witnessed mixed reactions.
Consensus 2012 earnings estimate of $4.57, composed of 23
estimates, witnessed 3 upward revisions compared with two downward
revisions over the last 30 days. The cautious stance of analysts on
their 2012 verdict on Boeing was in the face of downward U.S.
defense budget trends and the incoming effect of sequestration
currently required under the Budget Control Act effective from
January 2, 2013.
Magnitude of Estimate Revisions
Given the positive sentiment in earnings estimate revisions
witnessed over the last month, the consensus earnings estimate for
the second quarter of 2012 has gone up by 2 cents to $1.10.
Earnings estimate for 2012 has remained fixed at $4.57 per share
over the last 30 days.
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 26.42%.
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 its prominent defense peers like
Lockheed Martin Corporation
Rockwell Collins Inc.
) release their versions of the second quarter of 2012.