Shares of Boeing (BA - Free Boeing Stock Report) slipped after the aerospace/defense giant posted mixed first-quarter results. The report was quite good, overall, and management raised its earnings guidance, but the equity was trading close to its all-time high going into the release, so the bar was set rather high and the figures were under a microscope.
Boeing's earnings were better than expected, coming in at $2.34 a share on a GAAP basis and $2.01 adjusted for certain items. The year-earlier tallies were $1.83 and $1.74, respectively, and our target was $2.25. However, the top line was a bit light, which seemed to be the main sticking point with investors. Specifically, revenues fell 7% on a year-over-year basis, to $20.976 billion. The decline reflected the timing of various aircraft deliveries, though we had looked for a more modest dip, to an even $22 billion.
Looking at the quarter in more detail, Boeing delivered 169 commercial airplanes, down from 176 a year earlier (737 deliveries were lower, as planned, ahead of the 737 MAX's scheduled entry into service in May), though revenues in this segment were only down 1% thanks to growth in services. In terms of orders, 198 commercial orders were booked in the period, and backlog finished at more than 5,700 planes valued at $417 billion. Revenues at the Defense, Space & Security segment were down 18%, reflecting lower planned deliveries, though margins increased thanks to improved execution on production programs and services.
Looking ahead, leadership maintained its full-year 2017 revenue target of $90.5 billion-$92.5 billion, but raised its GAAP share-earnings guidance by a dime at the midpoint, from $10.25-$10.45 to $10.35-$10.55. The same adjustment was made to its estimated nonGAAP bracket, which now stands at $9.20-$9.40. Assumptions for margins, deliveries, research & development, capital expenditures, and pension expenses were also unchanged, though the effective tax rate is now thought to be 31%, down from previous expectations of 32%.
Even with the modest price retracement following the first-quarter earnings release, BA stock appears expensive. Indeed, it is still trading within our three- to five-year Target Price Range. So, while we are bullish on the company's prospects, seeing as how it is an industry leader with a massive backlog ($480 billion), we are less excited about the stock, despite its generous dividend yield and top mark for Safety.
About The Company: The Boeing Company is a leading manufacturer of commercial jet aircrafts. 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 2016, foreign sales accounted for 59% of overall revenues, and R&D amounted to 4.9% of sales.
