Boeing Co (NYSE:BA) reported third-quarter GAAP earnings per share of $3.60 and core earnings per share (non-GAAP)* of $3.51 reflecting overall solid execution on production programs and services, favorable tax items ($0.98 per share), and timing of aircraft deliveries.
Revenue guidance has been increased $500 million to between $93.5 and $95.5 billion on higher commercial deliveries. GAAP earnings per share guidance for 2016 has been increased to between $7.10 and $7.30 from $6.40 and $6.60 and core earnings per share (non-GAAP)* guidance has been increased to between $6.80 and $7.00 from $6.10 and $6.30 to reflect a favorable $0.70 per share tax basis adjustment. The third quarter favorable tax adjustment for a 2011-2012 tax settlement of$0.28 per share was previously announced in the second quarter of 2016 and was reflected in prior guidance.
“Solid operating performance across our commercial and defense and space businesses in the third quarter again generated strong cash flow for Boeing, which continues to fuel investments in our future and enable us to deliver compelling returns to our shareholders,” said Chairman, President and Chief Executive OfficerDennis Muilenburg. “We also captured key orders, reinforcing the strength of our large and diverse order backlog.”
“We achieved key milestones on the 737 MAX, 787-10 and other development programs, including the first KC-46 production contracts. Our teams remain focused on completing these development efforts and delivering better capabilities and economics to customers around the world.”
“We remain on track to deliver on our full-year commitments. At the same time, we are positioning Boeing for further growth through our intense focus on productivity, quality and safety across the company.”
Operating cash flow in the quarter was $3.2 billion, reflecting solid operating performance (Table 2). During the quarter, the company repurchased 7.6 million shares for $1.0 billion, leaving $7.5 billion remaining under the current repurchase authorization. The company also paid $0.7 billion in dividends in the quarter, reflecting an approximately 20 percent increase in dividends per share compared to the same period of the prior year.
Cash and investments in marketable securities totaled $9.7 billion, up from $9.3 billion at the beginning of the quarter. Debt was $10.5 billion, down from the beginning of the quarter, due to repayment of debt (Table 3).
Total company backlog at quarter-end was $462 billion, down from $472 billion at the beginning of the quarter, and included net orders for the quarter of $15 billion.
Commercial Airplanes third-quarter revenue decreased to $17.0 billion on lower planned delivery volume (Table 4). Third-quarter operating margin was 9.4 percent, reflecting delivery volume and mix, partially offset by lower period costs.
During the quarter, we began production of the 500th 787 Dreamliner, completed service ready validation of the 737 MAX 8, and began production of the 737 MAX 9. The 737 program has captured more than 3,300 orders for the 737 MAX since launch and the company remains on track to raise the production rate to 47 per month in the third quarter of 2017. During the quarter, we continued to grow our services business through an agreement with Japan Airlines to provide spare parts solutions.
Commercial Airplanes booked 107 net orders during the quarter. Backlog remains strong with more than 5,600 airplanes valued at $409 billion.
Defense, Space & Security
Defense, Space & Security’s third-quarter revenue was $7.5 billion. Third-quarter operating margin was 10.4 percent, reflecting solid execution and the impact of the Commercial Crew program (Table 5).
Boeing Military Aircraft (BMA) third-quarter revenue was $3.3 billion, reflecting fewer C-17 deliveries and volume on F-15. Operating margin increased to 13.3 percent, reflecting program mix. During the quarter, BMA was awarded a contract from the U.S. Air Force for low-rate initial production of 19 KC-46 Tanker aircraft and received an agreement from the U.K. Ministry of Defence to purchase 50 Apache attack helicopters and nine P-8 Poseidon aircraft.
Network & Space Systems (N&SS) third-quarter revenue decreased to $1.7 billion with an operating margin of 2.1 percent, primarily reflecting the charge on the Commercial Crew development program. The charge includes a $124 million reversal of cumulative pre-tax earnings recorded in prior periods and a $38 million pre-tax reach-forward loss, and was largely driven by delays in completion of engineering and supply chain activities. During the quarter, N&SS announced an award for a 702MP satellite with a new digital payload offering twice the capacity of previous designs.
Global Services & Support (GS&S) third-quarter revenue increased to $2.5 billion, reflecting higher volume in Aircraft Modernization & Sustainment and Training Systems & Government Services. Operating margin was 12.4 percent largely reflecting contract mix. During the quarter, GS&S was awarded contracts from theDefense Logistics Agency for F/A-18 spare parts.
Backlog at Defense, Space & Security was $53 billion, of which 38 percent represents orders from international customers.
At quarter-end, Boeing Capital’s net portfolio balance was $3.7 billion, up from the beginning of the quarter. Total pension expense for the third quarter was $453 million, down from $529 million in the same period of the prior year. Other unallocated items and eliminations revenue decreased from the same period in the prior year primarily due to the elimination of intercompany revenue for three aircraft delivered under operating leases. The effective tax rate for the third quarter decreased from the same period in the prior year primarily due to the favorable $440 million tax basis adjustment and the previously announced $177 million for the 2011-2012 tax settlement.
The company’s 2016 updated financial and delivery guidance (Table 7) reflects higher commercial deliveries and the impact of the tax basis adjustment. (Original Source)
Shares of Boeing are up nearly 1.5% to $140.78 in pre-market trading. BA has a 1-year high of $150.59 and a 1-year low of $102.10. The stock’s 50-day moving average is $131.78 and its 200-day moving average is $130.66.
On the ratings front, BA has been the subject of a number of recent research reports. In a report issued on October 7, Drexel Hamilton analyst Peter Skibitski reiterated a Buy rating on BA, with a price target of $183, which implies an upside of 32% from current levels. Separately, on October 6, Jefferies’ Howard Rubel reiterated a Buy rating on the stock and has a price target of $165.
According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Peter Skibitski and Howard Rubel have a total average return of 6.6% and 11.6% respectively. Skibitski has a success rate of 58% and is ranked #912 out of 4197 analysts, while Rubel has a success rate of 72% and is ranked #71.
Overall, 4 research analysts have assigned a Hold rating and 9 research analysts have given a Buy rating to the stock. When considering if perhaps the stock is under or overvalued, the average price target is $155.91 which is 12.1% above where the stock closed yesterday.
The Boeing Co. is an aerospace company that manufactures commercial jetliners and defense, space and security systems. Its products and tailored services include commercial and military aircraft, satellites, weapons, electronic and defense systems, launch systems, advanced information and communication systems, and performance-based logistics and training. The company is organized into three business units: Boeing Commercial Airplanes, Boeing Defense, Space & Security and Boeing Capital.