The Boeing Company (BA Quick quoteBA – Free Report) is expected to report second-quarter 2024 results on July 31, before the market opens.
The Zacks Consensus Estimate for revenues is pegged at $17.49 billion, representing a decline of 11.4% 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, marking a deterioration from the loss of 82 cents reported in the year-ago quarter. The bottom-line estimate has moved lower and lower over the past 60 days.
Image Source: Zacks Investment Research
Boeing has a solid history of earnings surprises. Earnings topped the Zacks Consensus Estimate in three of the trailing four quarters and missed in one quarter, with the average surprise being 17.83%.
Image Source: Zacks Investment Research
Earn whispers
Our proven model does not definitively predict an earnings beat for Boeing this time. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the likelihood of an earnings beat, which is not the case here. You can discover the best stocks to buy or sell before they’re 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.
Important factors to consider
Solid expectations from global service companies
We remain optimistic about Boeing Global Services (“BGS”) second quarter revenue performance as steadily improving global commercial aviation likely boosted fleet utilization and thus increased the volume of commercial jet services.
In the first quarter, the BGS business opened a maintenance facility in Jacksonville, FL, to support Boeing’s military customers. The operational efficiencies achieved at this facility may have helped 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, representing an improvement of 6.4% from the year-ago quarter’s reported figure. The consensus for earnings is pegged at $947.6 million, representing solid year-over-year growth of 10.7%.
Poor commercial and defense deliveries will hurt Q2 results
Boeing’s second-quarter deliveries reflect a 32.4% decline in commercial deliveries from the year-ago quarter’s reported figure. Defense deliveries also declined 26.3% year over year.
For manufacturing companies like Boeing, successful deliveries of finished products play a critical role in driving revenue growth.
It is therefore expected that the revenue results of both the commercial and defense activities will show a disappointing year-on-year performance.
The Consensus Estimate for Boeing’s commercial business segment topline is pegged at $6,340 million, representing a decline of 28.3% from the year-ago quarter’s reported figure. The Zacks Consensus Estimate for the defense unit’s revenues is pegged at $6,305 million, representing a decline of 2.2% year over year.
Global picture
Considering that Boeing’s military and commercial revenues accounted for nearly 76% of total revenues at the end of 2023, the notable decline in delivery figures for both commercial and defense deliveries likely negatively impacted the company’s overall revenue in the second quarter, offsetting the positive revenue contribution from the BGS unit.
In terms of profitability, it is likely that the outlier costs related to inspections and rework costs on the inventoried 787 aircraft, combined with the negative impact of supply chain challenges, negatively impacted BA’s quarterly profit.
Price Performance & Rating
Shares of Boeing have been on a downward trend, losing a significant percentage year-to-date. The stock has declined 28.3% year-to-date, underperforming the 6.1% decline of the Zacks Aerospace & Defense industry.
Boeing’s YTD performance
Image Source: Zacks Investment Research
As shown in the figure, other notable stocks from the same sector outperformed BA. Stocks from Lockheed (LMT Quick quoteLMT – Free report) and Embraer (ERJ Quick quoteERJ – (Free Report) rose 15.7% and 58.7% respectively this year, while that of Airbus (EADSY Quick quoteEADSY – Free Report) lost 8.1%.
From a valuation perspective, Boeing is trading at a discount to its industry. Currently, Boeing is trading at 1.32x forward 12-month earnings, which is below the industry’s forward earnings multiple of 1.56x. The stock is also trading below the five-year median of 1.44.
Price-sales ratio (forward 12 months)
Image Source: Zacks Investment Research
Investment theory
Despite commercial aviation statistics currently favoring jet makers like Boeing, ongoing quality control issues with the 737 program have put a significant dent in the company’s quarterly results of late. Delayed inspections and quality assurance issues for the aircraft model, along with supplier shortages of some key components for the 787 jets, likely played a major role in hampering the jet giant’s growth in the second quarter.
The one silver lining in these setbacks is the expected growth of its global services business, but that unit alone does not have the capacity to ramp up Boeing quickly.
The poor delivery performance of the commercial and defense units is also taking its toll on the cash balance, limiting financial strength, as reflected in the return on invested capital (ROIC) compared to the industry.
Image Source: Zacks Investment Research
Should you buy or sell BA?
With Boeing’s current ROIC being negative, indicating that its investments are not generating enough returns to cover its costs, investors should not buy the stock before Wednesday. Investors have already lost confidence in the stock, as evidenced by its year-to-date price performance. Second-quarter results are not expected to show a major rebound, given the downward revision to earnings estimates and a negative Earnings ESP.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
The post Boeing (BA) Q2 Earnings Coming: Should You Buy or Sell? – Jul 29, 2024 first appeared on Frugals ca.
