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Boeing (BA) Up 25.1% Since Last Earnings Report: Can It Continue?

A month has gone by since the last earnings report for Boeing (BA). Shares have added about 25.1% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Boeing due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Boeing Q3 Earnings Miss Estimates, Revenues Rise Y/Y

The Boeing Company incurred an adjusted loss of $6.18 per share for third-quarter 2022, much wider than the Zacks Consensus Estimate of a loss of a penny. The bottom line also deteriorated from the year-ago quarter’s loss of 60 cents.

The year-over-year downside can be attributed to losses on fixed-price defense development programs.

Including one-time items, the company posted GAAP earnings of $5.49 per share compared with 19 cents reported in the third quarter of 2021.

Revenues

In the quarter under review, Boeing’s revenues amounted to $15.96 billion, which missed the Zacks Consensus Estimate of $17.50 billion by 8.8%. The top line however improved 4% from the year-ago quarter’s figure of $15.28 billion.

This improvement was driven by higher year-over-year revenues registered by the company’s Commercial Airplanes and Global Services business units.

Total Backlog

Backlog at the end of third-quarter 2022 increased to $381.32 billion from $371.73 billion at the end of second-quarter 2022.

Segmental Performances

Commercial Airplane: Revenues at this segment increased 40% year over year to $6.26 billion, driven by higher 737 deliveries and the resumption of 787 deliveries. The segment incurred an operating loss of $643 million compared with a loss of $693 million in the year-ago quarter.

Boeing delivered 112 commercial planes during the quarter under review, up 32% year over year.

The backlog for this segment remained healthy, with over 4,300 airplanes valued at $307 billion.

Boeing Defense, Space & Security (BDS): This segment recorded revenues worth $5.31 billion in the third quarter, reflecting a year-over-year decline of 20%, primarily on account of losses on certain fixed-price development programs,Meanwhile, this unit incurred an operating loss of $2.80 billion against an operating income of $436 million in the year-ago quarter.

The backlog at BDS was $55 billion, 31% of which comprised orders from international clients.

Global Services: Revenues at this segment improved 5% to $4.43 billion on account of higher commercial services volume and a favorable mix. This unit generated an operating income of $733 million compared with $644 million in the year-ago quarter.

Boeing Capital Corporation (BCC): This segment reported quarterly revenues of $52 million compared with $71 million in the year-ago quarter.

At the end of third-quarter 2022, BCC's portfolio balance was $1.6 billion.

Financial Condition

Boeing exited third-quarter 2022 with cash and cash equivalents of $13.49 billion and short-term and other investments of $0.76 billion. At the end of 2021, the company had $8.05 billion of cash and cash equivalents and $8.19 billion of short-term and other investments. Long-term debt amounted to $51.79 billion at the end of third-quarter 2022, down from $56.81 billion at 2021 end.

The company’s operating cash outflow as of Sep 30, 2022 was $3.14 billion compared with $3.87 billion at the end of third-quarter 2021.

Free cash outflow totaled $0.55 billion at the end of third-quarter 2022 compared with $4.13 billion at the end of third-quarter 2021.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month.

The consensus estimate has shifted 112.5% due to these changes.

VGM Scores

Currently, Boeing has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Boeing has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.

Performance of an Industry Player

Boeing is part of the Zacks Aerospace - Defense industry. Over the past month, Lockheed Martin (LMT), a stock from the same industry, has gained 1.9%. The company reported its results for the quarter ended September 2022 more than a month ago.

Lockheed reported revenues of $16.58 billion in the last reported quarter, representing a year-over-year change of +3.5%. EPS of $6.87 for the same period compares with $6.66 a year ago.

For the current quarter, Lockheed is expected to post earnings of $7.40 per share, indicating a change of +2.2% from the year-ago quarter. The Zacks Consensus Estimate has changed +0% over the last 30 days.

Lockheed has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of B.

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