Will 777X Flight Test Failure Hit Boeing's (BA) Q3 Earnings?

Flight-testing failure for The Boeing Company’s BA 777X product line is expected to have impacted the company’s commercial business line in the third quarter. This unprecedented incident might have raised expenses for the aerospace giant’s commercial unit, which has already been under pressure due to the grounding of its 737 Max jets.  

Scheduled for release on Oct 23, Boeing’s third-quarter 2019 results are likely to reflect these factors.

Click here to know how the company’s overall Q3 performance is expected to be.

777X Setback

In September, a cargo door of a 777X model exploded during a structural test, thereby further delaying the fleet’s delivery schedule. The explosion forced Boeing to suspend the structural load tests of this jet family. As a result of this flight-testing failure, the jet major will have to get the door replaced and repeat the final stages of the test.

This might have pushed up operation and maintenance cost for the company’s commercial business segment and dragged down the unit’s bottom line. 

The Boeing Company Price and EPS Surprise

The Boeing Company Price and EPS Surprise

The Boeing Company price-eps-surprise | The Boeing Company Quote

This setback related to the 777X product line along with the company’s poor deliveries for the overall commercial business, which slumped 202% from the year-ago quarter, are expected to have hit the company’s Q3 commercial results hard. Further increased charges for storing 737 jets along with costs related to grounding and re-certification efforts for the product line are expected to have weighed on the bottom line.

The Zacks Consensus Estimate for earnings at Boeing’s commercial unit is pegged at $524 million, indicating 74.1% decline from the year-ago reported figure.

What the Zacks Model Unveils

According to the Zacks model, a company needs the right combination of two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better — to increase the odds of an earnings surprise.

Boeing has an Earnings ESP of -0.31% and a Zacks Rank #3, which makes surprise prediction difficult. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks to Consider

Here are some defense companies you may want to consider, which have the right combination of elements to post an earnings beat this quarter:

Huntington Ingalls Industries, Inc. HII is scheduled to report third-quarter 2019 results on Nov 7. The company has an Earnings ESP of +2.09% and a Zacks Rank #3.

Leidos Holdings, Inc. LDOS is set to report third-quarter 2019 results on Oct 29. The company has an Earnings ESP of +1.52% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Northrop Grumman Corp. NOC is scheduled to report third-quarter 2019 results on Oct 24. The company has an Earnings ESP of +2.26% and a Zacks Rank #3.

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Northrop Grumman Corporation (NOC): Free Stock Analysis Report

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The Boeing Company (BA): 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.

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