- In the fourth quarter, Boeing posted strong growth in its
revenues and profits on higher commercial airplane deliveries
driven by production rate hikes.
- The company's defense business also posted moderate growth
despite lower U.S. defense spending.
- In 2014, Boeing's results will likely continue to grow
driven by its recent 787 production rate hike and the upcoming
rise in its 737 production rate.
) fourth quarter revenues and profits grew strongly as expected on
higher commercial airplane deliveries driven by production ramp
ups. The airplane manufacturer's revenues jumped by 7% annually and
its earnings rose by 26% annually in the fourth quarter, to close a
very strong 2013. For full year 2013, Boeing's revenues rose by 6%
annually to $86.6 billion, and its earnings rose by 17% annually to
$5.96 per share, driven by strong growth from its commercial
aviation business. These 2013 results beat the company's prior
guidance released in October last year.
Looking ahead, Boeing anticipates to deliver more airplanes to
airlines in 2014, compared to 2013, which will likely continue to
drive growth in its earnings. Recent elimination of across the
board spending cuts, called sequestration, from the U.S.
government's fiscal 2014 budget will also provide short term relief
to Boeing's defense business, which constitutes around 40% of its
top line. In all, the company looks set to post strong growth in
We currently have
price estimate of $124 for Boeing
, around 5% below its current market price. We are in the process
of incorporating fourth quarter earnings and shall update our
See our complete analysis of Boeing here
Strong Order Inflows Prompt Production Rate Hikes Which
In the fourth quarter, Boeing delivered 172 commercial airplanes
to airlines, up from 165 it delivered in the fourth quarter of
2012. This hike in its airplane deliveries was driven by production
ramp ups across three of its highest selling airplane models - the
737, 777 and 787 Dreamliner. In the first quarter of 2013, Boeing
increased its 737 production rate to 38 airplanes per month, from
35 per month, and its 777 production rate to 8.3 airplanes per
month, from 7 per month. Thereafter, in May 2013, the company hiked
its 787 production rate to 7 airplanes per month, from 5 per month.
Driven by these production rate hikes, Boeing delivered 648
commercial airplanes in 2013, up from 601 it delivered in
2012. This figure is the highest ever commercial airplane
deliveries made by Boeing in a single year and exceeded Airbus'
2013 tally by 22 airplanes.
Boeing is currently benefiting from an upcycle in the commercial
aviation industry that has over the last few years seen strong
orders for new airplanes from airlines worldwide. Airlines from the
developed regions are placing orders for new airplanes to replace
their aging fleets. At the same time, airlines from the developing
world are placing orders to add flying capacity to their fleets. In
turn, these strong order inflows from across the world are growing
backlogs of airplane manufacturers like Boeing and Airbus. During
2012 and 2013, these strong order inflows from airlines expanded
Boeing's backlog from 3,771 airplanes to 5,080 airplanes, prompting
it to hike its production rates.
Even today, order inflows for commercial airplanes remain strong
evidenced by net orders for 465 airplanes received by Boeing in the
fourth quarter. Looking ahead, Boeing sees strong demand for new
commercial airplanes to continue driven by steady growth in global
air passenger traffic and gradual recovery in global air cargo
traffic. Earlier this month, the company produced its first 787 at
a higher production rate of 10 airplanes per month, and in the
coming months, it will hike its 737 production rate to 42 airplanes
per month, from 38 per month currently. On the back of these
production rate hikes, Boeing anticipates to deliver around 715-725
commercial airplanes to airlines this year. Driven by these higher
deliveries, the company anticipates its commercial airplane
segment's revenues to rise by around 8-12% annually in 2014.
Defense Segment Results Show Moderate Growth Despite
Boeing's defense segment also posted good results in the fourth
quarter despite a tough environment, especially in the face of
lower defense spending from the U.S. government, which constitutes
more than three-fourth of the company's total defense revenues.
However, the government's budget cuts weighed on Boeing's defense
backlog, which contracted to $49.6 billion at the end of 2013, from
$55.1 billion at the end of 2012. On the bright side, in its
earnings webcast, Boeing said that nearly 40% of its defense
backlog is constituted by orders from international customers - a
proportion that is much higher than share of international sales in
its Boeing's defense revenues. This effectively means that
international sales will likely constitute a larger share in
Boeing's defense revenues in the future. We figure this will temper
the impact from lower U.S. defense spending and help grow Boeing's
defense segment results.
View Interactive S&P Capital IQ Analyses