Will F/A-18 Order Growth Boost Boeing’s (BA) Q1 Earnings?
The Boeing Company’s BA Defense, Space & Security segment has been witnessing solid demand for its varied product offerings. However, a dismal delivery figure for its defense equipments marred this healthy demand scenario. We expect Boeing’s first-quarter 2018 results, scheduled for release on Apr 25, to duly reflect these factors.
In the first quarter, Boeing’s defense business won a number of multi-billion-dollar contracts. Also, of late, management has been witnessing strong support for funding levels, above the President’s budget request, for a number of its programs namely the F-18, CH-47 Chinook, Ground-Based Midcourse Defense, AH-64 Apache, the V-22 and the space launch system.
In sync with this, the company won quite a few contracts for its F/A-18 programs in the to-be-reported quarter. Such robust demand for its programs is likely to boost Boeing’s order growth and subsequently its defense backlog, which in turn, should boost the defense, space and security segment’s revenues in the quarter under review.
KC-46 Delivery- A Major Positive
The upcoming results are Iikely to reflect further progress in the company’s KC-46 tanker program. In 2011, the U.S. Air Force awarded Boeing a deal for designing, developing, manufacturing and delivering four next generation aerial refueling tankers – KC-46A. Also, the fourth quarter of 2017 witnessed Boeing’s first delivery contract of KC-46 international tanker to Japan.
With its management aimed at delivering first 18 tankers this year, we may expect the yet-to-be reported quarter’s results to reveal more updates on this program.
Deliveries – A Gloomy Picture
On Apr 10, 2018, Boeing announced first-quarter 2018 delivery figures that reflected a 40.5% decline in defense shipments compared with the previous year. Notably, the company’s defense deliveries totaled 25 in first-quarter 2018, down from 42 dispatched in the year-ago period. Total deliveries consisted of six AH-64 Apache helicopters (remanufactured) and eight Chinook helicopters (new and renewed). The company also delivered four P-8’s, five F/A-18s and two F-15s.
What Does the Zacks Model Unveil?
Our proven model shows that Boeing is likely to beat earnings estimates this quarter. This is because it has the right combination of two main ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.
Zacks ESP: Boeing has an Earnings ESP of +1.70%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: The company carries a Zacks Rank #2 (Buy), which along with a positive ESP increases the probability of a positive earnings surprise.You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Conversely, we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks That Warrant a Look
Here are a few companies in the Aerospace-Defense space that have the right combination of elements to post an earnings beat this quarter.
Rockwell Collins COL has an Earnings ESP of +0.19% and a Zacks Rank #2. The company is expected to report second-quarter fiscal 2018 results on Apr 27.
Raytheon RTN has an Earnings ESP of +1.91% and a Zacks Rank #2. The company is expected to report first-quarter results on Apr 26.
Embraer-Empresa Brasileira de Aeronautica ERJ has an Earnings ESP of +450.00% and a Zacks Rank #3. The company is slated to release first-quarter results on Apr 27.
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Embraer-Empresa Brasileira de Aeronautica (ERJ): Free Stock Analysis Report
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