Boeing Co (NYSE:BA) reported its first quarterly loss in seven years, but results topped Wall Street estimates to send BA stock flying in early trading.
BA last week did a good job preparing the market for the slew of charges that swung the bottom line into a net loss and forced it to cut its full-year forecast.
Expensive setbacks and delays with the 787, 747 and KC-46 tanker aircraft programs cut $3.23 a share from net income but investors had already baked that into the Boeing stock price.
For the most recent quarter, BA swung to a net loss of $234 million, or 37 cents a share, from a profit of $1.1 billion, or $1.59 a share, a year ago. On an adjusted basis, the loss came to 47 cents a share.
Any way you look at it, earnings easily surpassed analysts’ average estimate for a loss of 92 cents a share, according to a survey by Thomson Reuters.
As welcome as the better-than-expected results were, nothing matters more to the market than guidance. On that basis, BA pretty much delivered too. Boeing is now targeting full-year earnings at $6.10 to $6.30 a share, well below prior guidance of $8.15 to $8.35. Happily for anyone holding Boeing stock, analysts were looking for 2016 earnings of $5.34 a share.
Boeing stock gapped up more than 3% after the opening bell on the news.
BA Stock: Steady as She Goes
BA stock has been rebounding solidly since the end of June and appears to be gaining momentum. Indeed, Boeing stock has struggled to break resistance at its 200-day moving average all year … that is, until it at long last broke through a couple weeks ago and made a successful test of the key level for support.
Click to Enlarge Market sentiment is improving on the name for a number of reasons. Earnings and margin growth in the company’s defense business is making up for some of the drag coming out of the commercial segment.
Perhaps more importantly, Boeing knows how to calm down restive shareholders. As CEO Dennis Muilenburg said in a media release:
“Our strong cash generation also supported our ongoing commitment to invest in product innovation and in our people, and return substantial cash to shareholders through stock repurchases and dividends.”
Boeing generated free cash flow of $2.56 billion in the quarter and bought back 15 million shares for $2 billion. Furthermore, the company has cash and marketable securities of $9.3 billion on its books.
Lastly, it’s clear that Boeing stocks was overly discounted for the trouble BA is facing with orders and deliveries. Things are just not as bad as the market feared. Here’s the CEO again:
“The underlying operating performance of the company remains solid with our commercial and defense teams again delivering strong revenues and operating cash flow. Actions taken during the quarter that impacted our earnings were the right, proactive steps to reduce risk and strengthen our position for the future.”
The bottom line is that after Q2 results, BA appears set for a much stronger second-half in 2016.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.
