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Boeing (BA) Poised for Q1 Earnings Beat: Will Stock Gain?

Leading commercial aircraft manufacturer, The Boeing Co. BA, is set to release first-quarter 2016 results before the opening bell on Apr 27. The company posted a positive earnings surprise of 18.52% in the preceding quarter. We expect Boeing to surpass earnings estimate this time around as well.

Why a Likely Positive Surprise?

Our proven model shows that Boeing is likely to beat on earnings this season because it has the right combination of two key ingredients. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to beat estimates, and Boeing has the right mix.

Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at +0.55%. This is because the Most Accurate estimate is at $1.82 while the Zacks Consensus Estimate is pegged lower at $1.81. This is a meaningful indicator of a likely positive earnings surprise.

Zacks Rank: Boeing currently carries a Zacks Rank #3.

The company’s Zacks Rank #3 and positive ESP make us reasonably confident of an earnings beat.

Note that Sell-rated stocks (#4 or 5) should never be considered going into an earnings announcement, especially when the company is witnessing negative estimate revisions.

Surprise History

The above chart indicates that Boeing was able to register positive earnings surprise in the last four quarters, with an average beat of 14.15%.

What is driving the Better-than-Expected Earnings?

Boeing has stepped into its 100th year of business, with a 7% drop in share price in the first three-month period. Recently, it reported that commercial deliveries it made in the quarter declined 4.3%. Boeing’s commercial deliveries of 176 airplanes declined due to lower demand for its older long-range 767 and double-decker 747 jets.

Meanwhile, Boeing’s chief executive also underscored the fact that the company is losing important contracts for aircraft and satellites to overseas rivals due to a stand-off in Congress over the future of the U.S. Export-Import (Ex-Im) Bank. This has restricted the export credit agency’s financing capabilities.

However, the defense business remains solid. In the defense and space business, Boeing’s deliveries totaled 50 compared with 42 a year ago. Boeing’s total deliveries, however, remained flat at 226 in the first quarter 2016.

Overall, Boeing expects first-quarter revenues to be the lowest this year. Core EPS is estimated to be approximately 20% of its full-year earnings, which is projected in the rage of $8.15–$8.35. And Q1 cash flow is expected near breakeven, driven by the timing of receipts and expenditures.

The enacted fiscal-year 2016 budget also will aid Boeing in many of its core programs, comprising the P-8 Poseidon, the KC-46A tanker, Apache and Chinook helicopters, GMD missile defense, commercial crew and space launch system.

Other Stocks that Warrant a Look

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

Spirit AeroSystems Holdings, Inc. SPR has an Earnings ESP of +6.60% and a Zacks Rank #1. The company will report quarterly results on Apr 29.

Raytheon Company RTN has an Earnings ESP of +0.74% and a Zacks Rank #3. The company is scheduled to report quarterly results on Apr 28.

Huntington Ingalls Industries, Inc. HII has an Earnings ESP of +0.47% and a Zacks Rank #2. The company is scheduled to report quarterly results on May 5.

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BOEING CO (BA): Free Stock Analysis Report
 
SPIRIT AEROSYS (SPR): Free Stock Analysis Report
 
RAYTHEON CO (RTN): Free Stock Analysis Report
 
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