Boeing (BA) Up 6.2% Since Last Earnings Report: Can It Continue?

A month has gone by since the last earnings report for Boeing (BA). Shares have added about 6.2% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Boeing due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Boeing Q1 Earnings Top, Decline Y/Y on Coronavirus Woes

Boeing reported adjusted loss of $1.70 per share for first-quarter 2020, which came in narrower than the Zacks Consensus Estimate of a loss of $2.04. The bottom line however deteriorated significantly from the year-ago quarter’s earnings of $3.16.

This year-over-year downside can be primarily attributable to the impacts of the COVID-19 pandemic and 737 Max grounding, which resulted in lower commercial deliveries.

Including one-time items, the company incurred GAAP loss of $1.11 per share against earnings of $3.75 in the first quarter of 2019.

Revenues

In the quarter under review, Boeing’s revenues amounted to $16.91 billion, which missed the Zacks Consensus Estimate of $17.18 billion by 1.6%. The top line also plunged 26% from the year-ago quarter’s figure of $22.92 billion. This decline was primarily due to lower 737 deliveries as well as the COVID-19 pandemic that significantly affected airline passenger traffic.

Total Backlog

Backlog at the end of first-quarter 2020 declined to $438.6 billion from $463.4 billion at the end of 2019.

Segmental Performances

Commercial Airplane: Revenues at this segment slumped 48% to $6.21billion on account of lower deliveries driven by the 737 MAX grounding as well as impacts of COVID-19.

The segment incurred operating loss of $2.07 billion against operating income of $1.17 billion in the year-ago quarter.

Boeing delivered 50 commercial planes during the quarter under review, down 66%.

Backlog for this segment remains healthy with over 5,000 airplanes valued at $352 billion.

Boeing Defense, Space & Security (BDS): This segment witnessed 8% year-over-year decline in revenues to $6.04 billion in the first quarter. The downside was on account of a charge imposed on the KC-46A Tanker.

Meanwhile, the segment incurred operating loss of $191 million against operating income of $852 million in the year-ago quarter.

Backlog at BDS was $64 billion, 28% of which comprised orders from international clients.

Global Services: Revenues at this segment inched up 0.2% to $4.63 billion due to higher government services volume. Moreover, operating earnings improved 8% year over year to $708 million.

Boeing Capital Corporation (BCC): This segment reported quarterly revenues of $65 million compared with $66 million registered in the year-ago quarter. Operating earnings generated by this unit totaled $24 million compared with $20 million in the year-ago quarter.

At the end of first-quarter 2020, BCC's portfolio balance was $2.2 billion.

Financial Condition

Boeing exited the first quarter with cash and cash equivalents of $15.04 billion and short-term and other investments of $0.49 billion. At the end of 2019, the company had cash and cash equivalents of $9.49 billion and short-term and other investments of $0.55 billion.

Long-term debt amounted to $33.75 billion at the end of Mar 31, 2020, up from $19.96 billion at 2019 end.

Boeing generated $4.30 billion of operating cash outflow at the end of the first quarter against cash inflow of $2.78 billion at the end of March 2019. Free cash outflow totaled $4.73 billion at first quarter 2020 end against cash inflow with $2.29 billion at the end of first quarter of 2019.

During the first quarter, the company paid out $1.16 billion of dividends, almost in line with the year-ago quarter’s figure.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -9.38% due to these changes.

VGM Scores

Currently, Boeing has a poor Growth Score of F, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Boeing has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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