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Oct. 26, 2016, 6:58 a.m. EDT

Boeing earnings: What to expect

Outlook for 2016, any commentary on the widebody aircraft market will be a focus

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By Tomi Kilgore, MarketWatch


Bloomberg
A Boeing widebody 787 Dreamliner

Boeing Co. is scheduled to report third-quarter results before the market opens on Wednesday, with investors likely focused more on any commentary about the defense and aerospace giant’s outlook for the rest of the year than what it saw a month or two ago.

While investors appear to be growing more optimistic, with the stock running up toward a 9 ½ month closing high in morning trade Tuesday, some analysts have expressed concern that the market for commercial widebody jets, which for Boeing include the 777 and 787 model aircrafts, has continued to act as a headwind.

UBS analyst David Strauss said in a recent not to clients that “widebody demand trends have worsened” in recent months, and that he believes a 35% cut in global widebody production, as well as a 35% reduction in widebody rates, is needed to bring supply and demand back in balance.

Meanwhile, here’s what analysts are expecting from Boeing’s results:

Earnings : Boeing /zigman2/quotes/208579720/composite BA +6.83%  is expected to report earnings per share of $2.61 for the quarter to Sept. 30, according to the average estimate of analysts surveyed by FactSet, up from $2.52 in the same period a year ago. The FactSet EPS consensus has declined over the last couple months, from $2.67 as of Aug. 31.


FactSet

Estimize, a crowdsourcing platform that gathers estimates from Wall Street analysts, as well as buy-side analysts, hedge-fund managers, company executives, academics and others, has a consensus EPS estimate of $2.66, based on 62 estimates.

Boeing had reported a narrower-than-expected loss in the second quarter, after missing expectations in the first quarter. That quarterly profit miss was the first for Boeing in over four years.

Revenue : The FactSet revenue consensus is $23.6 billion, below the $25.8 billion reported a year ago. On Aug. 31, the FactSet consensus was $23.7 billion. Those crowdsourced by Estimize are projecting, on average, revenue of $23.6 billion.

Boeing beat the FactSet revenue consensus the last five quarters.

Stock price : Despite the recent strength, Boeing’s stock has still underperformed its peers, and the broader stock market, by a wide margin so far this year. It has lost 3.9% year to date through Tuesday, while the SPDR Industrials Select Sector exchange-traded fund /zigman2/quotes/202026558/composite XLI +1.50%  has climbed 7.4% and the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +1.34%  has gained 4.3%.

Most analysts are bullish on the shares, with the average rating of 24 analysts surveyed by FactSet the equivalent of overweight. The average stock price target of $148.28 was 6.7% above current levels.

Other issues : One area of focus for investors may be any commentary on the commercial cargo market, after chief executive Dennis Muilenburg said at an industry conference last month that the segment remains “flat” and would be a “continuing watch area,” according to a transcript provided by FactSet.

Regarding the widebody market, Muilenberg said he was seeing more hesitation, as orders were flat. He said that was partially the result of declines in cargo traffic, as well as slow economic growth and political unrest globally.

Earlier this month, Boeing announced a deal with Atlas Worldwide Holdings /zigman2/quotes/200338181/composite AAWW -0.50%  to convert nine 767 widebody passenger planes into cargo freighters. This comes about five months after Atlas announced a deal to provide air cargo services to e-commerce giant Amazon.com Inc. /zigman2/quotes/210331248/composite AMZN +2.49%

/zigman2/quotes/210331248/composite AMZN +2.49% Also in early October, Qatar Airways said it ordered 40 Boeing widebody jets worth $11.7 billion, and signed a letter of intent to buy up to 60 single-aisle planes worth $6.9 billion.

Investors may also be keenly focused on any changes to Boeing’s financial outlook for 2016. The following table reflects the guidance Boeing provided in July.

Boeing 2016 financial outlook
Financial metric Boeing guidance FactSet consensus
Total revenue $93.0 billion to $95.0 billion $94.0 billion
Adjusted EPS $6.10 to $6.30 $6.34
Commercial airplanes deliveries 740 to 745 744
Commercial airplanes revenue $64.0 billion to $65.0 billion $64.8 billion
Military aircraft revenue about $12.3 billion $12.4 billion
Network & space systems revenue about $7.3 billion $7.4 billion
Global services & support revenue about $9.4 billion $9.4 billion
Boeing Capital revenue about $300 million $332 million
Boeing Co., FactSet
/zigman2/quotes/208579720/composite
US : U.S.: NYSE
$ 156.03
+9.98 +6.83%
Volume: 29.12M
Sept. 25, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
0.00%
Market Cap
$88.07 billion
Rev. per Employee
$660,961
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/zigman2/quotes/202026558/composite
US : U.S.: NYSE Arca
$ 76.49
+1.13 +1.50%
Volume: 7.35M
Sept. 25, 2020 4:00p
loading...
/zigman2/quotes/210598065/realtime
US : Dow Jones Global
27,173.96
+358.52 +1.34%
Volume: 391.73M
Sept. 25, 2020 5:06p
loading...
/zigman2/quotes/200338181/composite
US : U.S.: Nasdaq
$ 60.24
-0.30 -0.50%
Volume: 343,404
Sept. 25, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$1.57 billion
Rev. per Employee
$817,626
loading...
/zigman2/quotes/210331248/composite
US : U.S.: Nasdaq
$ 3,095.13
+75.34 +2.49%
Volume: 4.62M
Sept. 25, 2020 4:00p
P/E Ratio
118.97
Dividend Yield
N/A
Market Cap
$1550.32 billion
Rev. per Employee
$359,671
loading...
/zigman2/quotes/210331248/composite
US : U.S.: Nasdaq
$ 3,095.13
+75.34 +2.49%
Volume: 4.62M
Sept. 25, 2020 4:00p
P/E Ratio
118.97
Dividend Yield
N/A
Market Cap
$1550.32 billion
Rev. per Employee
$359,671
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Tomi Kilgore is MarketWatch's deputy investing and corporate news editor and is based in New York. You can follow him on Twitter @TomiKilgore.

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