Shares of Boeing (BA – Free Boeing Stock Report) moved higher after the aerospace/defense company released better-than-anticipated fourth-quarter results and updated its guidance. In the December interim, the top line slipped 1% from a year earlier, to $23.286 billion, but edged ahead of our $23.215 billion forecast. The company delivered 185 commercial planes in the period (including the 500th 787 Dreamliner), up from 182 in the previous year. Sales in the Commercial Airplanes segment increased 1%, but were offset by a 12% decline at the Defense, Space & Security business. This reflected lower planned deliveries of military aircraft and a dip in satellite volumes, among other items.
Despite the top-line decline, fourth-quarter earnings per share rebounded strongly from the comparable 2015 tally. In fact, the GAAP figure clocked in at $2.59, while the adjusted number was $2.47, both of which were nicely ahead of our $2.38 call. Profitability at the Commercial Airplanes segment appeared to get a boost from the 787 Dreamliner, as well as a better delivery mix and lower R&D expenses.
Looking ahead, the company's 2017 guidance was a bit light, but investors did not seem too concerned. Management expects full-year revenues to be in the $90.5 billion-$92.5 billion range, which should lead to share net of $10.25-$10.45 on a GAAP basis, or $9.10-$9.30 in adjusted core earnings. We had been looking for $93.5 billion and $9.50 a share, respectively. The Commercial business should be the main profit driver, as leadership anticipates delivering 760-765 planes this year, versus 748 in 2016, though revenues are expected to dip as much as 4%. Wider margins should make up for the shortfall. Sales at the Defense, Space & Security business are also likely to slide (up to 5%), though operating margin expansion will probably not be as robust as on the Commercial side of the coin. Ongoing stock repurchases should help per-share comparisons. Boeing entered 2017 with a backlog of $473 billion and more than 5,700 commercial plane orders.
As for the stock, we continue to view Boeing shares as a good core holding for very conservative investors. While the equity's impressive recovery in 2016 has limited its capital gains potential, it sports an above-average dividend yield and garners our top rank (1) for Safety.
About The Company:The Boeing Company is a leading manufacturer of commercial jet aircraft. It also produces fighters (F-15, F/A-18), C-17 cargo carrier, V-22 helicopter, E-3 AWACS, E-4 command post, E-6 submarine communicator, ground transportation systems, develops the space station, and does work on the F-22 (ATF). In 2015, foreign sales accounted for 59% of overall revenues, and R&D amounted to 3.4% of sales.
