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Boeing (BA) Q2 Earnings Coming Up: Should You Buy or Sell?
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The Boeing Company (BA - Free Report) is scheduled to release second-quarter 2024 results on Jul 31, before market open.
The Zacks Consensus Estimate for revenues is pegged at $17.49 billion, implying an 11.4% decline from the year-ago quarter's reported figure. The consensus mark for second-quarter earnings is pegged at a loss of 1.68 per share, suggesting a deterioration from a loss of 82 cents reported in the prior-year quarter. The bottom-line estimate declined significantly in the past 60 days.
Image Source: Zacks Investment Research
Boeing has a solid earnings surprise history. Its earnings beat the Zacks Consensus Estimate in three of the trailing four quarters and missed the same in one, the average surprise being 17.83%.
Image Source: Zacks Investment Research
Earnings Whispers
Our proven model does not conclusively predict an earnings beat for Boeing this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat, which is not the case here. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
BA has a Zacks Rank #4 (Sell) and an Earnings ESP of -2.98%.
We remain optimistic about Boeing Global Services’ (“BGS”) top-line performance in the second quarter, as steadily improving global commercial air travel is likely to have bolstered fleet utilization, thereby boosting commercial jet services volume.
In the first quarter, the BGS business opened a maintenance facility in Jacksonville, FL, to support Boeing’s military customers. Operational efficiencies achieved in this facility might have aided the BGS unit’s bottom-line performance in the second quarter.
The Zacks Consensus Estimate for the unit’s revenues is pegged at $5,049.3 million, indicating an improvement of 6.4% from the year-ago quarter’s reported number. The consensus mark for earnings is pinned at $947.6 million, indicating solid growth of 10.7% year over year.
Poor Commercial & Defense Deliveries to Hurt Q2 Results
Boeing’s second-quarter deliveries reflect a 32.4% decline in commercial shipments from the year-ago quarter’s reported figure. Also, defense shipments deteriorated 26.3% year over year.
For manufacturing companies like Boeing, successful deliveries of finished products play a crucial role in boosting its revenue growth.
So, the top-line results from both its commercial and defense business segments are expected to reflect a dismal year-over-year performance.
The consensus estimate for Boeing’s commercial business segment’s top line is pegged at $6,340 million, implying a 28.3% decline from the year-ago quarter’s reported figure. The Zacks Consensus Estimate for the defense unit’s revenues is pegged at $6,305 million, indicating a decline of 2.2% year over year.
Overall Picture
Considering the fact that Boeing’s military and commercial revenues accounted for almost 76% of its total revenues as of 2023-end, the notable decline in delivery figures for both the commercial and defense shipments is likely to have hurt the company’s overall second-quarter top-line performance, outweighing the positive revenue contribution from the BGS unit.
On the bottom-line front, abnormal costs in relation to inspections and rework costs on inventoried 787 aircraft, along with the adverse impacts of supply-chain challenges, are likely to have hurt BA’s quarterly earnings.
Price Performance & Valuation
Boeing’s shares have exhibited a downward trend, losing a notable percentage over the year-to-date period. Specifically, the stock plunged 28.3% year to date, underperforming the Zacks aerospace-defense industry’s decline of 6.1%.
Boeing’s YTD Performance
Image Source: Zacks Investment Research
As evident from the image, other notable stocks from the same industry outperformed BA’s performance. Shares of Lockheed (LMT - Free Report) and Embraer (ERJ - Free Report) rallied 15.7% and 58.7%, respectively, year to date, while that of Airbus (EADSY - Free Report) lost 8.1%.
From a valuation perspective, Boeing is trading at a discount when compared to its industry. Currently, BA is trading at 1.32X forward 12 months earnings, which is lower than the industry’s forward earnings multiple of 1.56X. The stock is also trading lower than its five-year median of 1.44.
Price-to-Sales (forward 12 Months)
Image Source: Zacks Investment Research
Investment Thesis
Despite commercial air travel statistics currently being in favor of jet makers like Boeing, persistent quality control issues with its 737 program have been putting a big dent in the company’s quarterly results lately. Subsequent inspections and quality checks for this model of aircraft, along with supplier shortages of a few key parts of 787 jets, are likely to have played the role of major growth deterrents for this jet giant in the second quarter.
The only silver lining among these adversities is the growth expectation from its global service business. However, this unit alone does not boast the capacity to take Boeing on a swift ride.
The poor delivery performance of its commercial and defense units is also taking a toll on its cash balance, thereby limiting its financial prowess. This is evident from its return on invested capital (ROIC) compared to that of its industry.
Image Source: Zacks Investment Research
Should You Buy or Sell BA?
With Boeing’s current ROIC being a negative, indicating that its investments are not generating sufficient returns to cover its costs, investors should refrain from buying the stock before Wednesday. Investors have already been losing confidence in this stock, as evident from its year-to-date price performance. Its second-quarter results are not expected to make any major upturn, considering the downward revision in its earnings estimates as well as a negative Earnings ESP.
Image: Bigstock
Boeing (BA) Q2 Earnings Coming Up: Should You Buy or Sell?
The Boeing Company (BA - Free Report) is scheduled to release second-quarter 2024 results on Jul 31, before market open.
The Zacks Consensus Estimate for revenues is pegged at $17.49 billion, implying an 11.4% decline from the year-ago quarter's reported figure. The consensus mark for second-quarter earnings is pegged at a loss of 1.68 per share, suggesting a deterioration from a loss of 82 cents reported in the prior-year quarter. The bottom-line estimate declined significantly in the past 60 days.
Boeing has a solid earnings surprise history. Its earnings beat the Zacks Consensus Estimate in three of the trailing four quarters and missed the same in one, the average surprise being 17.83%.
Earnings Whispers
Our proven model does not conclusively predict an earnings beat for Boeing this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat, which is not the case here. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
BA has a Zacks Rank #4 (Sell) and an Earnings ESP of -2.98%.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Key Factors to Consider
Solid Expectations From Global Services Business
We remain optimistic about Boeing Global Services’ (“BGS”) top-line performance in the second quarter, as steadily improving global commercial air travel is likely to have bolstered fleet utilization, thereby boosting commercial jet services volume.
In the first quarter, the BGS business opened a maintenance facility in Jacksonville, FL, to support Boeing’s military customers. Operational efficiencies achieved in this facility might have aided the BGS unit’s bottom-line performance in the second quarter.
The Zacks Consensus Estimate for the unit’s revenues is pegged at $5,049.3 million, indicating an improvement of 6.4% from the year-ago quarter’s reported number. The consensus mark for earnings is pinned at $947.6 million, indicating solid growth of 10.7% year over year.
Poor Commercial & Defense Deliveries to Hurt Q2 Results
Boeing’s second-quarter deliveries reflect a 32.4% decline in commercial shipments from the year-ago quarter’s reported figure. Also, defense shipments deteriorated 26.3% year over year.
For manufacturing companies like Boeing, successful deliveries of finished products play a crucial role in boosting its revenue growth.
So, the top-line results from both its commercial and defense business segments are expected to reflect a dismal year-over-year performance.
The consensus estimate for Boeing’s commercial business segment’s top line is pegged at $6,340 million, implying a 28.3% decline from the year-ago quarter’s reported figure. The Zacks Consensus Estimate for the defense unit’s revenues is pegged at $6,305 million, indicating a decline of 2.2% year over year.
Overall Picture
Considering the fact that Boeing’s military and commercial revenues accounted for almost 76% of its total revenues as of 2023-end, the notable decline in delivery figures for both the commercial and defense shipments is likely to have hurt the company’s overall second-quarter top-line performance, outweighing the positive revenue contribution from the BGS unit.
On the bottom-line front, abnormal costs in relation to inspections and rework costs on inventoried 787 aircraft, along with the adverse impacts of supply-chain challenges, are likely to have hurt BA’s quarterly earnings.
Price Performance & Valuation
Boeing’s shares have exhibited a downward trend, losing a notable percentage over the year-to-date period. Specifically, the stock plunged 28.3% year to date, underperforming the Zacks aerospace-defense industry’s decline of 6.1%.
Boeing’s YTD Performance
As evident from the image, other notable stocks from the same industry outperformed BA’s performance. Shares of Lockheed (LMT - Free Report) and Embraer (ERJ - Free Report) rallied 15.7% and 58.7%, respectively, year to date, while that of Airbus (EADSY - Free Report) lost 8.1%.
From a valuation perspective, Boeing is trading at a discount when compared to its industry. Currently, BA is trading at 1.32X forward 12 months earnings, which is lower than the industry’s forward earnings multiple of 1.56X. The stock is also trading lower than its five-year median of 1.44.
Price-to-Sales (forward 12 Months)
Investment Thesis
Despite commercial air travel statistics currently being in favor of jet makers like Boeing, persistent quality control issues with its 737 program have been putting a big dent in the company’s quarterly results lately. Subsequent inspections and quality checks for this model of aircraft, along with supplier shortages of a few key parts of 787 jets, are likely to have played the role of major growth deterrents for this jet giant in the second quarter.
The only silver lining among these adversities is the growth expectation from its global service business. However, this unit alone does not boast the capacity to take Boeing on a swift ride.
The poor delivery performance of its commercial and defense units is also taking a toll on its cash balance, thereby limiting its financial prowess. This is evident from its return on invested capital (ROIC) compared to that of its industry.
Should You Buy or Sell BA?
With Boeing’s current ROIC being a negative, indicating that its investments are not generating sufficient returns to cover its costs, investors should refrain from buying the stock before Wednesday. Investors have already been losing confidence in this stock, as evident from its year-to-date price performance. Its second-quarter results are not expected to make any major upturn, considering the downward revision in its earnings estimates as well as a negative Earnings ESP.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.