What Will Drive Boeing’s Growth In The Near Term?

Boeing (NYSE:BA) suffered one its biggest setbacks in recent times over the last few quarters. The company bore the brunt of a weakening commercial aircraft market, while it lost out to competitors in the military space. That said, its fortunes began to turn toward the end of 2017, and its management has not looked back since. At the moment, the world’s largest aircraft manufacturer is enjoying the fruits of a resurgent economy that has led to increased air travel demand, which has consequently led to higher orders.

We have created an interactive dashboard What Is The Outlook For BA on the company’s expected performance in 2019. You can adjust the revenue and margin drivers to see the impact on the company’s overall revenues and earnings.

So far in the year, the company has managed to post good financials, only losing out in Q2 profits on two one-time charges. The biggest charge was recorded at the KC-46 tanker program; a program that has weighed on the bottom line for many quarters now. Due to this, in the latest quarter, margins at defense contracted by almost 2.6%, to come in at 9.3%. Boeing booked a near $418 million pretax charge on the tanker, which has already cost the company over $3 billion in overruns thus far.

That said, 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.

In general, we expect the program to turn from the current status of an indirect liability to asset very soon. This is bound to help financials at defense.

Additionally, countries the world over are working toward  strengthening their military programs in light of growing political turmoil globally. In this respect, many defense giants like Boeing and Lockheed Martin can expect to see a rise in orders going forward.

At commercial, the company has benefited greatly from a positive jump in orders over the past three quarters or so. This, in turn, has prompted a notable increase in the company’s production rate. In fact, according to the CEO, Dennis Muilenburg, the airplane manufacturer is on track to achieve its target of delivering over 900 planes by 2020. This announcement comes at the time when air traffic is increasing at a notable 6-7% a year, thereby pushing demand for commercial airliners sharply upward. We expect this to have a significant effect on the company’s top line as early as 2019.

Overall, it looks as though Boeing is well poised to record consistent growth in the near term. With rising orders at both commercial and military, we can expect to see the company post solid financials going forward.