A month has gone by since the last earnings report for Boeing (BA). Shares have lost about 3.3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Boeing due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Boeing Beats on Earnings in Q2, Hikes '18 Sales View
Boeing reported adjusted earnings of $3.33 per share for second-quarter 2018, beating the Zacks Consensus Estimate of $3.24 by 2.8%. The bottom line reflected an improvement of 34% from $2.49 in the year-ago quarter.
Excluding one-time items, the aerospace giant reported GAAP earnings of $3.73 per share, up 30% from $2.87 per share in the year-ago quarter.
The company's second-quarter revenues amounted to $24.26 billion in the quarter, surpassing the Zacks Consensus Estimate of $23.98 billion by 1.2%. The top line also improved 5% year over year, driven by improved revenues from all segments, except Boeing Capital.
Backlog at the end of second-quarter was up to $488 billion from $486.2 billion at the end of the first quarter. Reported backlog included $27 billion of net orders during the reported quarter.
Quarterly Segment Results
Commercial Airplane Segment: The segment witnessed a rise of 1% in revenues to $14.48 billion, on higher deliveries and mix. Operating margin for the quarter expanded 240 basis points (bps) year over year to 11.4%.
Boeing reported delivered 194 commercial planes during the quarter, up 6%.
A look at Boeing's second-quarter order details reveals that the company booked 239 net commercial orders (accounting for cancellations). Backlog for this segment was valued at $416 billion.
Boeing Defense, Space & Security (BDS): The segment witnessed an approximate 9% year-over-year increase in second-quarter revenues to $5.59 billion, driven by F/A-18 and weapons volume. Operating margin for the quarter contracted 260 bps to 9.3%.
Backlog at BDS was $52 billion, 35% of which comprised orders from international clients.
Global Services: The segment observed improvement of 15% in revenues to $4.09 billion, reflecting growth across the portfolio. Operating margin for the quarter contracted 130 bps year over year to 14.7%, on account of product and services mix.
Boeing Capital Corporation (BCC): Boeing Capital reported quarterly revenues of $72 million in line with the year-ago quarter's revenues. The segment's earnings were $24 million compared with $25 million a year ago.
At the end of second-quarter, BCC's portfolio balance was $3 billion.
Boeing exited the second quarter with cash and cash equivalents of $8.12 billion and short-term and other investments of $1.65 billion. At the end of first-quarter, the company had $9.24 billion of cash and cash equivalents and $0.66 billion of short-term and other investments. Long-term debt was $10.51 billion at the end of second quarter, up from $10.47 billion at first-quarter end.
Boeing generated $7.82 billion of operating cash flow at the end of second-quarter, up 10.9% year over year. Free cash flow was $4.30 billion at second-quarter 2018 end compared with free cash of $4.51 billion at the end of 2017's second quarter.
Boeing raised 2018 revenue guidance. The company currently expects 2018 revenues in the range of $97-$99 billion compared with the prior guidance of $96-$98 billion.
However, the company continues to expects adjusted or core earnings per share in the range of $14.30-$4.50. GAAP earnings are still projected in the range of $16.40-$16.60.
Commercial Airplanes' 2018 delivery expectations are reiterated in the band of 810 to 815 with revenues still projected in the range of $59.5-$60.5 billion. However, operating margin is now anticipated to be more than 11.5%, compared with earlier expectation of around 11.5%.
The company currently expects 2018 defense revenues in the range of $22-$23 billion, compared with the prior range of $21.5-$22.5 billion. Operating margin is now anticipated in the range of 10-10.5% compared with prior guidance of approximately 11%.
Boeing Capital expects the aircraft finance portfolio to remain stable. The company still anticipates segment revenues to be approximately $0.2 billion.
Boeing's 2018 R&D is still forecasted to be approximately $3.7 billion. Capital expenditures for 2018 is also expected to remain approximately $2.2 billion.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
Currently, Boeing has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for growth investors than value investors.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Boeing has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.