What To Expect From Boeing’s Q3 Earnings

Boeing (NYSE:BA) is all set to report earnings for the third quarter of FY 2017 on October 25. The company started the year off with a rather mixed Q1. However, it managed to turn things around in Q2. 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 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. We can expect the remainder of the financial year to benefit from this momentum.

Key Highlights:

• The commercial airplane market is seeing good demand as air carriers continue to enjoy solid profit and revenue gains in the year. Earlier in the month, Boeing reported that it managed to deliver close to 202 commercial aircraft, while deliveries at defense came in around 42. The good news is that, after showing consistent declines in the past few quarters, Boeing finally managed to post an increase in year-over-year deliveries. This increase can be primarily attributed to heavier 737 deliveries that more than offset lower wide-body deliveries this time around.
• Additionally, Boeing has seen a steady growth in orders, for both its commercial and defense products, throughout the quarter. The company managed to close the sale of about 127 aircraft in Q3, driven by flourishing 737 sales, which accounted for nearly 105 of the total aircraft sold. In general, the demand for commercial airplanes seems to be improving. A healthier commercial market, coupled with better pricing conditions for airlines, has provided significant opportunities for fleet expansion. We can expect this momentum to continue into 2018, as well.
• 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. The upcoming earnings call could shed more light on this.
• Due to the recent surge in orders, we can expect the company to see significant jumps in its cash flow over the remainder of 2017. Just last quarter, Boeing saw cash from operations come in at a notable $4.5 billion, 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.

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