News of recent layoffs might have caused shares of Boeing Co (NYSE:BA) to lose some altitude over the past month, but don’t hold your breath waiting for BA stock to land.
Aimed at offsetting weak aircraft sales, the Chicago-based company will reduce its engineering workforce by about 1,800 people effective June 23.
The announcement by the company sent BA stock down more than 1% on Monday. But ahead of its fiscal first-quarter 2017 earnings results due out next week, BA shares — up 15% year-to-date — can still fly higher.
The Strengths for Boeing Stock
Boeing is sitting in first class in terms of orders. The company, which recently signed a deal with Adient PLC (NYSE:ADNT) to create better, more functional aircraft seating for its airplanes, currently has a $473 billion backlog of aircraft orders with more than 5,700 commercial airplane orders it can still rely on. When it’s all said and done, Boeing will deliver between 765 to 800 planes this year, well above 2016 deliveries.
Furthermore, BA expects 2017 revenue to be between $90.5 billion and $92.5 billion, much higher than analysts forecasted. And to say nothing about the umber of contracts Boeing has secured from the Pentagon. Most recently, the company secured a $983 million deal from the U.S. Air Force to provide engineering support services. And with the company enjoying higher revenue and margins in its Defense, Space & Security segment, BA stock is one to own ahead of next week’s results.
For the three months that ended in March, Wall Street now expects Boeing to earn $1.96 per share on revenue of $21.48 billion, according to analysts polled by Thomson Reuters. This compares to the year-ago quarter when the company earned $1.74 per share on revenue of $22.63 billion. For the full year, ending in December, earnings are projected to rise 29% year-over-year to $9.36 per share, while revenue of $92.15 billion would decline 2.6% YoY.
Indeed, the fact that revenue for both the quarter and full year are projected to decline would be discouraging. But declining revenues have stopped Boeing stock, which pays a 3.2% annual yield, from delivering almost 30% in earnings growth. To that end, Monday’s announcement regarding layoffs — aimed at cutting costs — could be a positive for BA, especially when it implies that the company’s $473 billion order backlog won’t be impacted.
Bottom Line for BA Stock
Boeing’s attractive combination of income and value should keep BA stock flying high for much of 2017. Combined with the company’s announcement on Mar. 27, saying it will raise list price of every one of its planes in order to recover higher manufacturing costs including labor, BA stock has no plans to crash land.
As of this writing, Richard Saintvilus did not hold a position in any of the aforementioned securities.
