What Can We Expect From Boeing’s Q1 Earnings?

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The Boeing Company

Boeing (NYSE:BA) is all set to report earnings for the first quarter of FY 2017 on April 25. The world’s largest airplane manufacturer suffered heavily in 2016. The company’s revenues were hurt on the back of a slumped commercial aircraft market. Additionally, it posted special charges in a few of its programs that affected profits in the first half of the year. Despite all this, Boeing managed to beat earnings estimates in the last three out of four quarters, posting an average earnings surprise of 21.4%. That said, the company is expecting 2017 to be better, in comparison to 2016.

The company expects full year revenues in 2017 to come in between $90.5 billion and $92.5 billion, much higher than analysts forecasted. Additionally, the airplane manufacturer expects the full year earnings per share to fall in the $9.10 to $9.30 range. Further, the company expects to deliver between 765 and 800 airplanes in the year, significantly higher than the figure recorded in 2016.

In the last earnings call, management mentioned that as per the usual seasonality, Q1 is going to see the lowest revenues in the year. The company also estimated that the earnings per share during the quarter could come in to be approximately 20% of the full-year earnings.

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Probable Factors:

  • Boeing disclosed first-quarter deliveries earlier in the month. Commercial and defense shipments were down a significant 4% and 16%, respectively, on a year-over-year basis. These figures mark the lowest quarterly commercial delivery count in almost three years. The company cited lower-than-expected demand for its 737 and 777 jets as the primary reason for the decline in the first quarter deliveries of 169 airplanes.
  • As mentioned previously, such delivery figures were expected in the quarter, keeping in mind the seasonality factor and the fact that Boeing had cut production at many of its programs last year to accommodate for the slump in the commercial aerospace market. That said, the company’s order book saw healthy growth in the quarter.
  • In Q1, the company reported an order of 30 737 MAX 8 airplanes from the CDB Aviation Lease Finance in Dublin. The value of the deal, at the current list price, comes out to about $3.3 billion. Furthermore, the company also won an order valued at nearly $13.8 billion from Singapore Airlines for 39 wide-body airplanes. These orders are expected to give Boeing much needed respite.
  • At the Defense business, Boeing bagged a modification contract worth over $3 billion, from the U.S. Army for supplying lot 7-11 of AH-64E Apache attack helicopters to the government of Saudi Arabia. Additionally, the division won a modification contract from the U.S Air Force, worth over $2.1 billion for the production of KC-46 Lot 3. These contracts are bound to help nudge the top line in the right direction.
  • Additionally, as Boeing continues to cut employees off its roster, we can expect a jump in earnings in the coming quarter.

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