Boeing (NYSE:BA) is scheduled to announce its second quarter earnings report on Wednesday, July 25. The company is coming off a good previous quarter where it posted strong revenue and profit growth on the back of increased commercial aircraft deliveries.^[1] We anticipate the trend to continue in to second quarter driven by record order backlog. However, it will be interesting to see if the U.S. defense spending cuts impact the growth in the Defense, Space and Security business division of the company in the second quarter.

On the whole, we anticipate strong revenue and profit growth for the company driven by higher aircraft demand from emerging economies.

We currently have a price estimate of $91 for the company, approximately 25% above its current market price.

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Strong demand for commercial aircraft from developing economies

Boeing projects a $4.5 trillion jetliner market over the next 20 years for 34,000 new commercial jets. The largest portion of this demand comprising of 12,030 aircraft is estimated to come from Asia-Pacific region including China and India, followed by distant second and third of 7,760 and 7,290 aircraft from Europe and North America respectively.^[2] Consequently, Boeing has been focusing on these high demand markets of Asia-Pacific and possess several clients in the region including Air India, China Airlines and Singapore Airlines among others. The company recently also bagged a large order of 230 commercial aircraft from Lion Air, which is an Indonesian airline.

We anticipate the Boeing’s continuing focus on these markets to drive growth in the long-term.

US defense spending cuts to impact top line growth

Boeing is one of the largest U.S. defense contractors and U.S. defense, space and security systems constitute approximately 32% of the overall company value. Thus, the U.S. Budget Controls Act of 2011 that proposes $487 billion cut in defense spending over the next 10 years starting in fiscal year 2012 is expected to impact top line growth for the company in its U.S. defense, space and security systems business division. We anticipate this to impact revenue growth for the division during the second quarter as well.

Rising pension liabilities to impact margins

Also, Boeing has been forced to incur higher pension and post-retirement costs due to historically low interest rates. The pension and post-retirement liabilities for the company increased 63% in 2011 to reach $2.62 billion. We anticipate contributions against the head to impact margins for the company in the second quarter.

On the whole, we anticipate Boeing to post good growth in second quarter earnings driven by higher aircraft deliveries and offset by defense spending cuts and higher pension costs.

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