What Can We Expect From Boeing’s Q2 Earnings?

Boeing (NYSE:BA) is all set to report earnings for the second quarter of FY 2017 on July 26. The company started the year off with a rather mixed quarter, beating on earnings, while lagging on revenues.  We can expect this adverse momentum to continue into Q2 as well, on the back of lower commercial deliveries.

The company had previously stated that it expects full year revenues in 2017 to come in between $90.5 billion and $92.5 billion, much higher than analysts forecasted, while full year earnings per share is expected 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. However, given the current demand climate, we can expect the company to revise its guidance in the upcoming earnings call.

Probable Factors:

• Boeing disclosed second-quarter deliveries earlier in the month. Commercial shipments were down a significant 8% on a year-over-year basis, while defense shipments came in relatively flat. The company cited lower-than-expected demand for its 737, 777, 787 and 767 jets as the primary reason for the decline in the second quarter deliveries of 183 airplanes. However, the numbers reflected an 8.3% growth, sequentially.
• Delivery of the single-aisle 737 jet fell to 123, down from 127 in the same period last year. This decline was mainly the result of greater involvement in the production of the latest 737 MAX. Shipments of the 777 and 787 Dreamliners were 21 and 33, in comparison to 28 and 38 a year ago. Boeing delivered three 767 jets compared with four in the year-ago quarter. That said, 747 deliveries jumped by one plane to 4 this time. Such sluggish delivery numbers are bound to hurt the revenues in the quarter.
• Despite the slow deliveries, Boeing has seen a steady growth in orders, for both its commercial and defense products, throughout the quarter. The company signed a massive deal with Lion Group to buy 50 737 MAX 10 jets for a total of $6.24 billion. Additionally, the airplane manufacturer signed MOUs with SpiceJet and Tibet Financial Leasing for the purchase of a cumulative 60 737 MAX airplanes worth approximately $7.2 billion. Apart from this, it clinched an order from AerCap for 30 787-9 Dreamliners, valued at $8.1 billion.
• The company managed to clinch several notable orders in the defense space as well. Boeing secured a  modification contract worth $1.1 billion in the quarter to procure Redesigned Kill Vehicle (RKV) development. It also received a handful of other contracts related to the company’s Apache aircraft program, Longbow crew trainers and the Mid-Endurance Unmanned Aircraft Systems program worth a cumulative $1.4 billion. We can expect all these contracts to help offset losses to the company’s top line in the to-be-reported quarter.

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