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Will Upbeat Defense Deliveries Aid Boeing's (BA) Q2 Earnings?

Zacks Equity Research

The Boeing Company’s BA Defense, Space & Security (BDS) segment is expected to generate robust revenues in second-quarter 2019, courtesy of solid order growth expectations for the company’s varied defense products. Increased deliveries for the KC-46 program are also likely to boost the unit’s performance.

Scheduled for release on Jul 24, Boeing’s second-quarter 2019 results should duly reflect these factors.

Order Flow to Aid the Top Line

With the current U.S. administration in favor of spending sufficiently on the nation’s defense, Boeing continues to witness broad support for its defense products from the Pentagon, NASA and Congress.

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Meanwhile, the BDS segment has been seeing high demand for its defense and space offerings like rotorcraft, commercial derivatives, fighters and satellites from overseas. In fact, a steady flow of contracts for this unit’s varied products has become a regular affair for Boeing. Backed by such consistent order flow, revenues at the BDS segment has been increasing significantly and we expect second-quarter 2019 results to reflect a similar trend.

In line with this, the Zacks Consensus Estimate for revenues at Boeing’s defense unit is pegged at $6,526 million, indicating 16.7% growth from the year-ago reported figure.

The Boeing Company Price and EPS Surprise

The Boeing Company Price and EPS Surprise
The Boeing Company Price and EPS Surprise

 

The Boeing Company price-eps-surprise | The Boeing Company Quote

KC-46 Program & Improved Margins

Boeing has been experiencing high costs associated with the certification and subsequent launch of its KC-46 Tanker program in recent past. However, since the beginning of the first quarter, the company is actively delivering these tankers. Boeing delivered 8 tankers till the first month of the second quarter. Anticipating deliveries of more such tankers in the remaining months of the soon-to-be-reported quarter, costs related to the KC-46 program are likely to no longer limit BDS unit’s bottom-line growth.

Moreover, the company’s consistent focus on productivity and execution is anticipated to boost its margins. These, in turn, should enable the BDS segment to eventually register solid earnings growth in the quarter to be reported. In sync with this, the Zacks Consensus Estimate for BDS unit’s earnings is pegged at $715 million, suggesting a 37.2% rise from the year-ago quarter’s reported figure.

Impressive Delivery Figures

Boeing announced second-quarter 2019 delivery figures on Jul 9, which reflected a 131.3% solid surge in defense shipments compared with the previous year. In the quarter, its defense deliveries totaled 37, up from 16 dispatched in the year-ago period. Such impressive delivery figures are expected to significantly boost the defense segment’s top line.

What the Zacks Model Unveils

Our proven model shows that Boeing is likely to beat earnings in the second quarter. This is because a stock needs to have both — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for this to happen. Zacks Rank #4 (Sell) or 5 (Strong Sell) stocks are best avoided, especially if they have a negative Earnings ESP. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Boeing has an Earnings ESP of +2.72% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Other Key Picks

In addition to Lockheed Martin, investors can consider the following players from the Aerospace sector that have the right combination of elements to post an earnings beat this quarter.

Moog Inc. MOG.A is expected to report third-quarter fiscal 2019 results on Jul 26. The company has an Earnings ESP of +0.76% and a Zacks Rank #3.

Ducommun Incorporated DCO is expected to report second-quarter 2019 results on Aug 5. The company has an Earnings ESP of +12.05% and a Zacks Rank #3.

Recent Defense Release

Textron Inc. TXT reported second-quarter 2019 earnings from continuing operations of 93 cents per share, which surpassed the Zacks Consensus Estimate of 85 cents by 9.4%.

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