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Poor Defense Deliveries to Hit Boeing's (BA) Q1 Earnings

Zacks Equity Research

The Boeing Company’s BA Defense, Space & Security (BDS) segment is likely to have recorded marginal growth in first-quarter 2020, thanks to poor deliveries of the company’s varied defense products. Closure of production units in the latter part of the quarter might have pushed up its expenses.

Boeing’s first-quarter 2020 results are scheduled to be released on Apr 29.

Click here to know how the company’s overall Q1 performance is expected to be.

Steady Order Flow to Aid Backlog

With the current U.S. administration spending significantly on the nation’s defense for the past couple of years, Boeing’s defense and space unit has been witnessing solid order flow from the Pentagon, NASA and Congress for its varied products. This, in turn, has been boosting BDS unit’s backlogs.

Keeping up with its usual trend, the aerospace giant clinched a handful of multi-milliondollar contracts during the first quarter, which should duly get reflected in the upcoming results in the form of backlog growth.

The Boeing Company Price and EPS Surprise

The Boeing Company Price and EPS Surprise

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


Poor Deliveries to Hurt Q1 Results

Boeing’s first-quarter 2020 delivery figures reflected a notable decline of 35% in its defense shipments from the year-ago period.

In the quarter, its defense deliveries totaled 39, down from 60 in the year-ago period. Such poor delivery figures are expected to have marred the defense segment’s top-line as well as bottom-line growth.

Nevertheless, strong performance of the company’s existing platforms, especially its KC-46 program along with space programs, including Commercial Crew and Space Launch Systems, are likely to have benefited first-quarter results. Notably, the company’s KC-46 Tanker program has been gaining solid traction in the recent quarters. Notably, during the first quarter, the company delivered five such tankers.

However, due to the spread of the novel coronavirus across the globe, most of Boeing’s production units and deliveries were closed during the latter part of the first quarter.This might have pushed up expenses for storing the finished products and dragged down the company’s earnings.

Currently, the Zacks Consensus Estimate for revenues at Boeing’s defense unit is pegged at $6,729 million, indicating 1.8% growth from the year-ago reported figure. The Zacks Consensus Estimate for BDS unit’s earnings, pegged at $747 million, suggests a decline of 11.8% from the year-ago quarter.

What the Zacks Model Unveils

According to the Zacks model, the combination of two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better — increases the odds of an earnings surprise.

Boeing has an Earnings ESP of -10.08% and a Zacks Rank #3, which makes surprise prediction difficult. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks to Consider

Here are some defense companies you may want to consider as these have the right combination of elements to post an earnings in their upcoming release:

Curtiss-Wright Corp. CW has an Earnings ESP of +1.75% and a Zacks Rank #3. The company is scheduled to announce first-quarter 2020 earnings on May 6. You can see the complete list of today’s Zacks #1 Rank stocks here.

Huntington Ingalls Industries, Inc. HII has an Earnings ESP of +1.79% and a Zacks Rank #3. The company will announce first-quarter 2020 earnings results on May 7.

Northrop Grumman Corp. NOC has an Earnings ESP of +1.85% and a Zacks Rank #3. The company is set to announce first-quarter 2020 earnings on Apr 29.

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