Can Higher Volumes & Deliveries Aid Boeing's (BA) Q4 Earnings?

The Boeing Company (NYSE:BA) is set to release fourth-quarter and full-year 2018 results on Jan 30, before the opening bell. Higher commercial deliveries should boost revenue growth in the to-be-reported quarter.

Solid order growth, in the form of higher backlog, is likely to get reflected in the quarterly result.

Let's take a detailed look at the factors influencing Boeing’s performance in the fourth quarter.

Multiple Contract Wins

Boeing is the largest aircraft manufacturer and one of the major aerospace and defense contractors in the United States. Therefore, it enjoys a solid inflow of contracts from both the Pentagon as well as foreign allies, courtesy of the company’s varied product offerings.

Among the commercial contracts that Boeing won in the fourth quarter, the significant ones include a $12-billion order for delivering 100 737 MAX 8 aircraft to Green Africa Airways and a $5.9-billion order for supplying 30 737 MAX jets with options for 20 more to a Saudi-based airline. The aerospace giant won another $5.9 billion order to supply 40 737 MAX 8 airplanes to a Korea-based airline.

In the defense space, the company clinched a modification contract worth $367 million related to the CMV-22B and MV-22B variants of the V-22 family of tiltrotors and a $240 million deal for performing highly complex technical systems engineering and integration requirements associated with the Ballistic Missile Defense system. Additionally, it secured a $307.5 million contract for offering integrated product support in relation to F/A-18 jets’ A-D and E-G versions. The company also won a few more multi-million-dollar contracts from the Pentagon.

Such solid order growth must have boosted Boeing’s backlog count, which should get duly reflected in the upcoming quarterly results.

Mixed Deliveries & Top-Line Expectation

Boeing’s fourth-quarter deliveries reflected a 13.9% year-over-year rise in commercial shipments. Meanwhile, defense shipments declined 25.6% from the year-ago figure.

Such higher commercial deliveries must have boosted the company’s quarterly performance. Moreover, increased volumes projected at the defense business should bolster Boeing’s overall revenue growth. Higher global services revenues are too expected to drive the top line. For the fourth quarter, the company’s total sales is pegged at $26.7 billion, mirroring 5.1% improvement year over year.

Bottom-Line Performance & Solid Cash Flow

Charges related to Boeing’s planned investments in the newly-awarded T-X Trainer and MQ-25 unmanned aircraft, and cost growth on the KC-46 Tanker are expected to persistently hurt its total earnings. Notably, this should get duly reflected in the company’s fourth quarter results. The Zacks Consensus Estimate for fourth-quarter earnings stands at $4.53, reflecting a year-over-year decline of 5.6%.

In December 2018, Boeing announced plan to reward its shareholders with a sturdy dividend hike of 20%. Alongside, management authorized a new stock repurchase authorization program of $20 billion that replaces the existing share buyback program. This reflects the solid cash flow generation capability of the company, which we can expect to get reflected in the upcoming quarterly result.

What the Zacks Model Unveils

Our proven model shows that Boeing is not likely to beat on earnings this quarter. 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. 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 -0.16% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Please note that we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Other Stocks That Warrant a Look

Here are some companies in the Zacks Aerospace sector that you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Lockheed Martin Corp. (NYSE:LMT) is expected to report fourth-quarter 2018 results on Jan 29. The company has an Earnings ESP of +4.20% and a Zacks Rank #3.

L3 Technologies, Inc. (NYSE:LLL) is expected to report fourth-quarter 2018 results on Jan 29. The company has an Earnings ESP of +1.19% and a Zacks Rank #3.

Huntington Ingalls Industries, Inc. (NYSE:HII) is expected to report fourth-quarter 2018 results on Feb 14. The company has an Earnings ESP of +11.85% and a Zacks Rank #3.

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