How Did Boeing Perform In Q2?

Boeing (NYSE:BA) posted good results this time around. The company managed to beat both the revenue and earnings consensus estimates, by a comfortable margin. That said, profits in the quarter came in significantly lower than expected on two one-time charges that weighed on the bottom line. Revenue growth was boosted on strong performances across all divisions. In this respect, the company has decided to raise its revenue guidance for the full year. It now expects $97-$99 billion, up from a previously stated outlook of $96-$98 billion, as global services and defense sales guidance was nudged higher.

While the outperformance thus far does warrant an increased valuation, we believe that the stock may be trading higher than it should. In this respect, we have created an interactive dashboard to best elaborate on our valuation method and reasoning. Please click on the link to change drivers and arrive at your own estimate.

• The notorious KC-46 tanker returns yet again to plague the company’s profits. The program has weighed on the bottom line for many quarters now. In fact, margins at defense contracted by almost 2.6%, to come in at 9.3% due to the increased costs at the program. In the quarter, Boeing booked a near $418 million pretax charge on the tanker, which has already cost the company over $3 billion in overruns thus far. However, things at the project seem to be heading in a positive direction now. Over the quarter, the company was able to perform all the flight tests that were required to deliver the first aircraft. We expect to learn more news on the final certification process over the coming weeks.
• The recent trade wars don’t seem to be affecting operations at the company, much to the relief of investors. Last month, China hit back at the Trump administration with its own set of tariffs, however, the impact of these tariffs is only expected to affect older-model 737s. That said, tariffs imposed by President Trump on steel and aluminum could affect the company’s costs notably. Despite the political turmoil, China remains a very important market for the aerospace giant, and orders from the region aren’t expected to slow down any time soon.