Boeing (BA 353.52, +3.47, +0.99%) is trading higher after reporting Q3 results this
morning. Boeing is a supplier of commercial jetliners, military aircraft,
satellites, missile defense, human space flight, and launch systems and
services. It's one of the two major manufacturers of 100+ seat airplanes for
the worldwide commercial airline industry and one of the largest defense
contractors in the US.
On the commercial aircraft side, Boeing offers a family of commercial jetliners designed to meet a broad spectrum of passenger and cargo requirements of airlines. This includes the 737 narrow-body model and the 747, 767, 777, and 787 wide-body models. Development continues on the 787-10 and certain 737 MAX derivatives and the 777X program.
On the defense side, Boeing makes jet fighters and missile systems; vertical lift, including rotorcraft, and tilt-rotor aircraft; mobility, surveillance and engagement, including battle management, airborne, anti-submarine, transport and tanker aircraft. Its primary defense customer is the US Dept of Defense. Boeing also has a sizeable Global Services segment, which provides services to its commercial and defense customers. Services include aviation services support, aircraft modifications, spare parts, training, maintenance documents, data analytics and technical advice to commercial and government customers worldwide.
Turning to the Q3 results, core (non-GAAP) EPS came in at $3.47, which was a good bit better than market expectations. Revenue rose 3.8% yr/yr to $25.15 bln, which was also better than expected. Total company backlog at quarter-end grew to $491 bln (up from $488 bln at Jun 30), including 5,800+ commercial aircraft.
In terms of its outlook for 2018, Boeing guided higher for core EPS and revenue. BA now expects FY18 core EPS of $14.90-15.10 vs prior guidance of $14.30-14.50. Revenue guidance was tipped higher to $98-100 bln from $97-99 bln. BA also reaffirmed guidance for 2018 deliveries of 810-815 commercial airplanes.
During the quarter, BA captured important new defense business, winning and investing in the MQ-25 and T-X programs and securing the MH-139 contract. Within the Commercial Airplanes business, the 777X static test airplane was completed and moved into test setup. Its Global Services business saw key wins in the quarter including P-8 Poseidon training contracts for the U.S. Navy and Royal Australian Air Force and an order from GECAS for 20 737-800 Boeing Converted Freighters.
In sum, Boeing's Q3 report was quite good overall. Probably the standout metric to us was the raised full year EPS guidance. BA beat expectations in Q3 but the increase in guidance was larger than the beat. That means that BA indirectly guided quite a bit higher for Q4. What's also impressive is that BA has been consistently reporting strong results in 2018 and it has been increasing its production rates. For example, BA transitioned from 47 aircraft per month to 52 per month on its 737 line and that should grow to 57 in 2019. Earnings reports from aerospace suppliers ATI (yesterday) and CRS (this morning) confirm that demand for new plans is robust right now and it sounds like 2019 will be strong as well.
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