Aerospace and defense giant The Boeing Company (BA – Free Boeing Stock Report) has reported September-period financial results. For the quarter, revenues came in at $25.1 billion, which was slightly ahead of our estimate of $25.0 billion and represented a year-over-year increase of 3%. As for the bottom line, Boeing achieved a share profit of $4.07, or 33% better than the prior-year tally. That said, share net was below our estimate. Management also raised its revenue and earnings guidance. All told, Boeing shares advanced nicely on the news.
Looking at the quarter in more detail, the company delivered 190 commercial aircraft, compared to 202 in the year-earlier period. Although deliveries declined, revenues at the Commercial Airplanes division were little changed, thanks to the sale of more profitable aircraft. More importantly, the segment's operating margin widened. On that note, cost reductions, lower research & development expenditures, and more efficient production methods helped the operating margin expand 340 basis points, to 13.2%. During the quarter, Commercial Airplanes also booked 171 net orders, and its backlog now stands at 5,800 planes valued at $413 billion.
The Defense, Space & Security division experienced a 13% top-line increase, which mostly stemmed from greater deliveries of satellites, air tankers, fighter aircraft, and weapon systems to the U.S. military and its allies. Its backlog at quarter end was $58 billion, with 31% representing orders from international customers.
All told, Boeing performed quite well during the September quarter, and management has increased its full-year 2018 revenue and earnings guidance. Specifically, it now anticipates $98 billion-$100 billion for the top line, up from the previous expectation of $97 billion-$99 billion. As for share net, leadership's new range is $16.90-$17.10. Previously, it was looking for share earnings of $16.40-$16.60. We think that the new guidance is obtainable, though our top- and bottom-line estimates are at the low end of the respective ranges, at $98 billion and $16.90 a share. Looking further out, our earnings estimate for 2019 remains unchanged at $18.25 a share and, overall, we are quite bullish in regard to Boeing's business prospects.
As for the stock, as mentioned, it advanced nicely following the quarterly report, and has easily outperformed the broader market over the past couple of years. As such, the equity now appears quite expensive in terms of price-to-earnings and other valuation metrics. In our view, we would not blame current shareholders from periodically taking profits, and buying back the stock following any material dips in price.
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 2017, foreign sales accounted for 55% of overall revenues, and R&D amounted to 3.4% of sales.
- Ian Gendler
