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Boeing Beats Q3 Earnings Estimates, Raises 2015 Outlook

Aerospace giant The Boeing CompanyBA delivered third-quarter 2015 adjusted earnings of $2.52 per share, confidently beating the Zacks Consensus Estimate of $2.22 by 13.5%. Earnings also increased 18% from $2.14 per share a year ago, owing to strong operational performance.

On a GAAP basis, Boeing reported a profit of $2.47 per share, up 33% from $1.86 per share in the year-ago quarter.

The company's revenues advanced 9% year over year to $25.85 billion in the reported quarter. The reported figure was also ahead of the Zacks Consensus Estimate of $24.74 billion by 4.5%.

The Boeing Company - Earnings Surprise | FindTheBest

Total Backlog

Backlog at the end of the third quarter declined to $484.8 billion from $488.8 billion at second-quarter end. Reported backlog included $22 billion of net orders during the quarter.

Segment Results

Commercial Airplane Segment: The segment saw a 10% increase in revenues to $17.69 billion on higher delivery volume. However, operating margin contracted 120 basis points (bps) year over year to 10%. Margins reflected stepped-up R&D and the dilutive impact of higher 787 deliveries.

In the third quarter, Boeing delivered 199 commercial airplanes compared with 186 deliveries a year ago given continued growth for its 787 Dreamliner and Next Generation 737 single-aisle jetliners. The Next Generation 737 model continues to be the pillar of Boeing's strength in the commercial airplane sector with deliveries of 126 airplanes, followed by its 787 Dreamliner model with 37 deliveries, pumping out at over 12 a month. In the year-earlier quarter, the company had delivered 120 units of the 737 and 31 units of the 787 model.

The company expects a total of 135 Dreamliner shipments for 2015.

Boeing also delivered 27 777s during the third quarter, flat with the year-ago period.

Boeing won net orders for 166 planes in the Sep 2015 quarter with backlog reaching 5,700 airplanes valued at $426 billion.

Boeing Defense, Space & Security (BDS): The segment witnessed an approximately 6% year-over-year decline in its quarterly revenues to $8.35 billion. Two of the three sub-segments - Boeing Military Aircraft (BMA) and Network & Space Systems (N&SS) - recorded year-over-year top-line growth of 15% and 5%, respectively. Global Services & Support (GS&S) witnessed an 8% year-over-year revenue decline.

Quarterly operating margin expanded 140 bps year over year to 12.2%.

Backlog at BDS was $59 billion, 40% of which comprised orders from international clients.

Boeing's deliveries in the defense and space business numbered 48 in the third quarter of 2015, on par with the prior year. Total deliveries in the quarter consisted of 16 AH-64 Apache helicopters (both new and remanufactured) and 15 Chinook helicopters (new and renewed). The company also delivered 8 F/A-18 jets, 4 P-18 models, 3 F-15s and 2 C-17 Globemaster III.

Boeing Capital Corporation (BCC): Boeing Capital reported quarterly revenues of $114 million compared with $91 million in the year-ago quarter. The segment's earnings were $10 million as against an $11 million loss a year ago.

At the end of the third quarter, BCC's portfolio balance was $3.4 billion, up from $3.3 billion at the beginning of the quarter.

Financial Condition

Boeing ended the third quarter with cash and cash equivalents of $9.38 billion and short-term investments of $474 million. At year-end 2014, the company had $11.73 billion in cash and cash equivalents and $1.36 billion of short-term investments. Long-term debt was $8.40 billion in the reported quarter, up from $8.14 billion at 2014 end.

The company generated $2.90 billion of operating cash flow (before pension contributions) in the quarter, up a significant 72% from $1.69 billion generated in the same period last year. Free cash flow was $2,298 million compared with $317 million a year ago.

Guidance

The company boosted its adjusted or core earnings per share guidance to the range of $7.95−$8.15 from its earlier projection of $7.70−$7.90 for 2015. GAAP earnings are now expected in the range of $7.65-$7.85 per share ($7.60−$7.80 expected earlier).

The company also raised its 2015 revenue guidance to the range of $95−$97 billion from $94.5-$96.5 billion expected earlier.

Commercial Airplanes' 2015 delivery expectations are upped to a band of 755−760 airplanes (750−755 earlier) with revenues projected in the $65−$66 billion range ($64.5−$65.5 billion earlier). Operating margin is pegged at 9%.

The company reaffirmed the 2015 defense revenues guidance in the $29.5 billion to $30.5 billion range and operating margin of approximately 10% (9.5% earlier).

Boeing Capital Corp. expects its aircraft finance portfolio to remain stable. The company expects segment revenues to approximate $0.3 billion.

Boeing's 2015 R&D forecast is now approximately $3.4 billion ($3.5 billion earlier). Capital expenditures for 2015 are expected to be $2.8 billion.

Zacks Rank

Boeing currently holds a Zacks Rank #2 (Buy).

There is no denying that Boeing is flying high on the back of rising demand for its fuel-efficient commercial planes. The aircraft manufacturing behemoth once again reported higher deliveries driven by strong commercial numbers.

At the Peer

Yesterday, Lockheed Martin Corp. LMT posted third-quarter 2015 earnings before the opening bell. The company reported quarterly earnings of $2.77 per share, comfortably surpassing the Zacks Consensus Estimate of $2.70 by 2.6%. Earnings also increased 0.4% from $2.76 per share a year ago, as higher fighter jet demand led to increased revenues.

Upcoming Peer Releases

Both General Dynamics Corp. GD and Northrop Grumman Corp. NOC are slated to report their third-quarter 2015 results on Oct 28, 2015, before the opening bell.

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NORTHROP GRUMMN (NOC): Free Stock Analysis Report

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LOCKHEED MARTIN (LMT): 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.


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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