Boeing Q3 Earnings: Shares Slump Despite Bright Future

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BA: The Boeing Company logo
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The Boeing Company

Boeing (NYSE:BA) reported a pretty mixed earnings this time around. The company managed to beat on both the earnings and revenue estimates quite comfortably. Despite this, the company saw its share price dip by about 3% on sluggish growth at two of its main businesses – commercial aircraft, and defense, space, and security. Additionally, both business segments had a combined $329 million run up in costs from the KC-46 aerial fuel tanker, as the program continues to be plagued by production problems. At the moment, the program remains in testing as Boeing seeks to certify the aircraft.

Last year, the company went through a tough few quarters where it witnessed a sustained fall in orders and deliveries. A slowing world economy coupled with low oil prices forced governments and airlines to defer or cancel any existing orders, while rejecting deliveries. However, things seem to have turned the corner and we could be seeing this momentum carry into 2018 as well. Boeing posted a record 202 aircraft delivered in the quarter, worth approximately $15 billion. Additionally, the manufacturing giant managed to take in 117 net new airplane orders worth $7 billion during the quarter.

Additionally, Boeing decided, in July, to open up a facility which manufactures various kinds of avionics and other electrical systems. The company realized that getting into the services industry was the only way to leverage profits in a tough global climate. To put this into perspective, Rolls Royce, the British engine supplier, makes close to one-half of its sales and all of its profits from servicing engines. In this respect, it opened up its fourth segment – Boeing Global Services – in the quarter. The segment reported a significant revenue of $3.6 billion with operating margins of over 14%.

Further, Boeing has decided to up its guidance for 2017. It now expects earnings per share to come in around $11.20-$11.40, up ten cents in comparison to the previous guidance range of $11.10 – $11.30. The upward revision is mainly the product of a lower-than-expected tax rate. As for 2018, the company hopes to increase revenues and earnings significantly on the back of increased production and additional revenues from BGS. The company has promised to divulge more details on the matter in January.

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