Boeing Q2 Earnings: Shares Jump To Record High On Stellar Earnings

Boeing (NYSE:BA) recorded a stellar quarter this time around. While revenues missed slightly on weak commercial deliveries, earnings per share came in significantly higher at $2.89, beating the consensus estimate by over 30 cents. Further, management has decided to raise the full year EPS guidance by a whopping 75 cents to $11.10 and $11.30 a share. This move represents the second such upward revision made in the year. Additionally, the company managed to rake in a notable $4.5 billion in free cash during the quarter on increased production and higher sales of its most popular jets.

Following the earnings call, Boeing’s share price jumped by nearly 10%, bolstered by strong demand for air travel and the company’s ongoing cost cutting initiatives.

Key Highlights:

• The commercial airplane market is seeing good demand as air carriers continue to enjoy solid profit and revenue gains in the year. Further, passenger traffic continues to remain well above GDP, with the growth figure coming in just under 8% year-over-year. These factors coupled with low oil prices have contributed to a surge in order activity the world over – particularly for the 737 MAX – which is expected to drive the top line over the long term.
• Given the increased demand, healthier market conditions, and a robust backlog, Boeing has decided to increase the production rates across most of its programs. For instance, at the 737 program, the company hopes to increase production to 57 jets a month on a backlog of nearly 4,500 aircraft, as early as 2019.
• In the wide body market, the company continues to see some varying levels of demand across aircraft models in the near term. That said, orders continue to see a healthy uptick in the year. In this respect, the 777 production for FY 2017 is completely sold out. At present, the program records a total of 111 orders in its backlog.
• As mentioned above, Boeing saw cash from operations come in at a notable $4.5 billion in the quarter, roughly double the estimates that pegged it at $2.5 billion. The extra cash allowed management to raise the 2017 cash flow guidance by $1.5 billion to $12.25 billion. Additionally, the company will use the cash to increase share buybacks by $3.5 billion, while contributing another $3.5 billion in pension contributions in the year to reduce future costs.

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