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Will 787 Performance Issue Hurt Boeing (BA) in Q3 Earnings?

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Increased 737 delivery figures must have boosted The Boeing Company’s BA commercial business in the third quarter. However, overall third-quarter 2021 results, scheduled for release on Oct 27, are projected to reflect financial impacts of the performance issues hampering the 787 program.

Click here to know how the company’s overall Q3 performance is expected to have been.

737 Max Remains a Key Catalyst

Following receipt of the U.S. Federal Aviation Administration’s (FAA) approval for 737 Max’s return to service in November 2020, Boeing resumed deliveries for this jet in May and since then there has been a solid ramp up in delivery of 737 jets. Notably, the aerospace giant delivered 66737 jets in the third quarter of 2021, reflecting a massive improvement when compared with a mere three units delivered in the year-ago quarter.

In fact, such significant delivery figures of 737 primarily drove a huge surge of 204% in the company’s overall commercial deliveries. This in turn must have contributed favorably to revenues for Boeing Commercial Airplane (BCA) business segment in the soon-to-be-reported quarter.

Currently, the Zacks Consensus Estimate for Boeing’s commercial business segment’s revenues, pegged at $4,707 million, indicates a solid 30.9% improvement from the year-ago quarter’s reported figure.

The Boeing Company Price and EPS Surprise

The Boeing Company Price and EPS Surprise
The Boeing Company Price and EPS Surprise

The Boeing Company price-eps-surprise | The Boeing Company Quote

Earnings Expectation

On the cost front, the company must have incurred significant expenses on account of the huge number of 737 aircraft that are still parked in the company’s storage facilities. This might have weighed on the company’s commercial bottom-line performance.

Moreover, in relation to the 787 performance issue, the financial impact of inspections, rework, temporary production rate adjustment, and delivery delays are projected to have had an impact on BC’s quarterly earnings.

However, abnormal production cost related to 737 program has been declining, which in turn must have boosted its third-quarter earnings. Also, improvements in commercial airplanes' financial performance due to increasing 737 MAX deliveries and consistent efforts by the BCA team to manage costs through business transformation activities must have contributed toward this unit’s bottom-line growth.

The Zacks Consensus Estimate for its commercial unit is pegged at a loss of $215 million, reflecting an improvement from loss of $1,369 million incurred in the third quarter of 2020.

What the Zacks Model Unveils

Our proven model predicts an earnings beat for Boeing this time around. Notably, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat.

Boeing has an Earnings ESP of +100.00% and a Zacks Rank #3. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Other Stocks to Consider

Here are a couple of defense companies you may want to consider, as these also have the right combination of elements to post an earnings beat this season:

Transdigm Group TDG has an Earnings ESP of +0.36% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

CAE Inc CAE has an Earnings ESP of +9.46% and a Zacks Rank #3.

Huntington Ingalls HII has an Earnings ESP of +3.59% and a Zacks Rank #2.

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The Boeing Company (BA) : Free Stock Analysis Report

Transdigm Group Incorporated (TDG) : Free Stock Analysis Report

Huntington Ingalls Industries, Inc. (HII) : Free Stock Analysis Report

CAE Inc (CAE) : Free Stock Analysis Report

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