Boeing Earnings Will Keep BA Stock Aloft for Some Time

Advertisement

Boeing (BA) earnings proved to be one of the few highlights of this reporting season, as the blue chip aerospace company delivered a beat-and-raise quarter and a flood of free cash flow.

ba stockTrue, concerns remain about a potential “aircraft bubble,” as a substantial number of wide-body jets are scheduled to come off lease. It’s possible that airlines will opt to buy those used jets at a discount, tamping demand and prices for new aircraft.

For now, however, demand for more fuel-efficient aircraft remains robust, despite declining fuel costs. That fact alone lends support to the argument that airlines will continue to favor new planes over used ones.

Either way, Boeing is flying high and — on a relative basis, at least — so is BA stock. Boeing stock, a component of the Dow Jones Industrial Average, was up nearly 7% year to date before getting a lift from the positive earnings surprise.

That’s a blessing in an otherwise poor year for equities. The broader market is off 1.4% so far this year. And as for total return, the dividend on BA stock yields 2.65% against 2.14% for the S&P 500.

Thanks to the strong quarterly results, hefty backlog, and — most importantly — forecast hike, Boeing stock looks good to maintain its market-beating ways through year-end and beyond.

BA Stock Pops on Earnings Trifecta

For the most recent quarter, Boeing earnings came to $1.7 billion, or $2.47 per share, up from $1.36 billion, or $1.86 per share, a year ago. On an adjusted basis — which is what analysts and the market care about — earnings were $2.52 per share. That beat the Street’s estimate of $2.22 by a wide margin, according to a survey by Thomson Reuters.

Revenue increased 8.7% to $25.8 billion. Analysts, on average, were looking for earnings of $24.74 billion.

The commercial aircraft segment was the key to the quarter, as BA delivered 199 planes worth nearly $17.7 billion. In last year’s quarter, deliveries of commercial aircraft were 186 worth $16.1 billion.

Just as critical, the pipeline remains full. Boeing received 166 net orders in the third quarter, bringing the total backlog to 5,700 planes.

The strong quarter generated a flood of cash for BA. Free cash flow surged to $2.3 billion, up from $317 million last year.

Lastly, the BA earnings report came with the market’s favorite dessert of higher guidance. Full-year Boeing earnings are now targeted at $7.95-$8.15 per share, which is a boost of 25 cents. The company lifted its projected revenue range by $500 million to $95 billion-$97 billion.

Anyone holding Boeing stock should be feeling pretty good right now, and they can expect more upside into the end of the year. If nothing else, BA stock should benefit from investors looking to window dress their portfolios in an otherwise tough year for equities.

As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.

More From InvestorPlace


Article printed from InvestorPlace Media, https://investorplace.com/2015/10/boeing-earnings-will-keep-ba-stock-aloft/.

©2024 InvestorPlace Media, LLC