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Boeing (BA) to Report Q4 Earnings: Will the Stock Surprise?

Leading commercial aircraft manufacturer The Boeing Co.BA is set to release fourth-quarter 2016 results before the opening bell on Jan 25.

The company posted a positive earnings surprise of 33.97% in the preceding quarter. Moreover, the company surpassed the Zacks Consensus Estimate in three of the past four quarters, with an average beat of 24.66%.

Let's see how things are shaping up for this announcement.

Factors at Play

Boeing recently reported a 1.8% year-over-year decline in its commercial deliveries in 2016 to 748 airplanes due to sluggish demand for the 737, 747 and 767 models. However, the figure is above the company's guidance of deliveries between 740 and 745 jets for 2016. Again, the company's fourth-quarter 2016 commercial deliveries of 185 airplanes were up year over year due to higher demand for the 737, 777 and 767 jets.

In the defense and space business, Boeing's deliveries were 185 in 2016, down from 190 a year ago. In the fourth quarter of 2016, the company's deliveries were 40, down from 44 a year ago.

Boeing enjoys a steady flow of contracts for both its commercial and defense products. During the fourth quarter, the company received an order for five 787-9 Dreamliners, valued at $1.32 billion at current list prices, from Donghai Airlines. Moreover, it inked a high-value deal with Iran Air for 80 jetliners, valued at $16.6 billion.

Within the defense business, Boeing clinched a $558.5 million contract from the U.S. Air Force to upgrade F-15 Combined APG-63 Version 3, Radar Improvement Program Version 3 and APG-82 Version 1 Radar Modernization Program radar. In addition, its unit won a foreign military sales contract worth $207.5 million from the Pentagon. Boeing also won a contract, worth $308.3 million, to provide for the engineering change proposal 6472 integration of Next Generation Jammer Pod onto the EA-18G aircraft. These contracts should contribute significantly to the company's top line in the fourth quarter.

Also, in the quarter under review, Boeing boosted its quarterly dividend by 30% and authorized a new stock repurchase plan of $14 billion, thereby giving investors a share of benefits of soaring airliner deliveries. Boeing will pay a revised quarterly dividend of $1.42 per share on Mar 3, to shareholders on record as of Feb 10. Notably, on account of this hike, each Boeing shareholder will enjoy an extra 13.6-18.3% on each common share of the company. These investor friendly moves will help the company to maintain its growth trajectory in the near as well as long term.

Overall, for the fourth quarter, the Zacks Consensus Estimate for earnings stands at $2.34, reflecting a year-over-year increase of 46%; while that for revenues is pegged at $23.45 billion, translating into a 0.5% decline.

Earnings Whispers

Our proven model does not conclusively show that Boeing is likely to beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here, as you will see below:

Zacks ESP: Boeing has an Earnings ESP 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at $2.34.

You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Zacks Rank: Boeing's Zacks Rank #3, when combined with an ESP of 0.00%, makes our surprise prediction difficult for this quarter.

Notably, Sell-rated stocks (#4 or 5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Price Movement

Shares of Boeing have gained 16.1% over the last three months, outperforming the Zacks categorized Aerospace-Defense industry's gain of 14.4%. This could be because the company's strong balance sheet and cash flows provide financial flexibility in matters of incremental dividend, ongoing share repurchases and earnings accretive acquisitions.

Stocks that Warrant a Look

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Huntington Ingalls Industries, Inc. HII is scheduled to report fourth-quarter 2016 results on Feb 16. The company has an Earnings ESP of +2.82% and a Zacks Rank #1. You can see the complete list of today's Zacks #1 Rank stocks here .

Northrop Grumman Corp. NOC is scheduled to report fourth-quarter 2016 results on Jan 26. The company has an Earnings ESP of +0.8% and a Zacks Rank #2.

General Dynamics Corp. GD is scheduled to report fourth-quarter 2016 results on Jan 27. The company has an Earnings ESP of +1.18% and a Zacks Rank #3.

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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.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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