Will 777X Related Costs Hurt Boeing (BA) in Q2 Earnings?

The Boeing Company’s BA commercial airplane business is expected to have benefited from increased 787 delivery figures in the second quarter of 2023.

However, the company’s second-quarter earnings, scheduled for release on Jul 26, are likely to reflect impacts of abnormal costs related to the 787 program.

Click here to know how the company’s overall quarterly performance is likely to have been.

The Boeing Company Price and EPS Surprise

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

Solid 737 & 787 Jet Deliveries to Boost Growth

Thanks to a steady recovery in air traffic (both domestic and international), improved delivery figures for Boeing’s 787 jets were observed in the soon-to-be-reported quarter. The aerospace giant delivered 136 787 Dreamliner jets in the second quarter of 2023 compared with 121 jets in the year-ago period, following this product line’s delivery resumption in the third quarter of 2022.

Such significant delivery figures caused a 12.4% surge in the company’s overall commercial deliveries. This, in turn, might have boosted Boeing Commercial Airplane (BCA) segment’s revenues in the quarter to be reported.

The top-line estimate for Boeing’s commercial business segment is pegged at $6,788 million, implying a solid 9.1% improvement from the year-ago quarter’s reported figure.

Earnings Expectations

Improvements in BCA's financial performance, owing to increasing 787 deliveries and consistent cost management efforts by the BCA team, are likely to have contributed to this unit’s second-quarter bottom-line growth.

Moreover, the company has been steadily increasing production rates for its key commercial programs to meet the robust demand. This, in turn, might have bolstered its production efficiency thereby aiding the segment’s overall bottom-line performance.

However, margin performance for the BCA unit is projected to be a little volatile in the soon-to-be-reported quarter, with the company steadily liquidating the 737 and 787 inventory levels as well as shutting down the storage facilities. This, along with consistent abnormal costs related to the 787 as well as 777X jets programs, is likely to have had adversely impacted earnings for the BCA segment.  

Further, higher research and development expenses projected for this unit, as predicted by our model, indicate a 7.8% improvement from the year-ago quarter’s level. This might have hurt BCA’s earnings.

The second-quarter earnings estimate for BA’s commercial business segment is pegged at a loss of $350 million, indicating a deterioration from the year-ago quarter’s reported loss of $242 million.

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for Boeing this time around. 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. This is not the case here.

Boeing has an Earnings ESP of -1.45% and a Zacks Rank #3 at present. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks to Consider

Below are three defense stocks that have the right combination of elements to post an earnings beat this reporting cycle.

Huntington Ingalls Industries HII is expected to release second-quarter results on Aug 3. HII has an Earnings ESP of +0.48% and a Zacks Rank #3 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Huntington Ingalls delivered a four-quarter average earnings surprise of 8.09%. The consensus estimate for its second-quarter earnings is pegged at $3.14 per share, while that for sales is pinned at $2.73 billion.

L3Harris Technologies LHX is scheduled to release second-quarter results on Jul 26. LHX has an Earnings ESP of +1.67% and a Zacks Rank #3 at present.

L3Harris delivered a four-quarter negative earnings surprise of 0.37%, on average. The Zacks Consensus Estimate for LHX’s earnings is pegged at $2.91 per share, while that for sales is pinned at $4.36 billion.

Embraer SA ERJ is expected to report second-quarter results on Aug 14. ERJ has an Earnings ESP of +25% and a Zacks Rank #3 at present.

Embraer delivered a four-quarter average negative earnings surprise of 253.33%. The consensus mark for ERJ’s earnings is pegged at 12 cents per share, while that for sales is pinned at $1.16 billion.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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The Boeing Company (BA) : Free Stock Analysis Report

Embraer-Empresa Brasileira de Aeronautica (ERJ) : Free Stock Analysis Report

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

L3Harris Technologies Inc (LHX) : Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.