Boeing's Second Quarter Earnings: A Closer Look

Boeing, the leading commercial aerospace company, is set to release its second-quarter earnings on Wednesday. The anticipation among investors is palpable, given the company's recent struggles.

Last quarter, Boeing fell short of Wall Street estimates—an unfortunate trend that has persisted in 14 out of the past 17 quarters. Understandably, investors are feeling apprehensive this time around.

However, it seems that Boeing is gradually recovering from the impact of the pandemic. As the aviation industry slowly returns to normalcy, some degree of stability can be expected.

Despite these promising signs, analysts are still predicting an earnings miss for the second quarter. Estimates suggest a per-share loss of 88 cents, with sales projected to reach $18.5 billion. The range of estimates is vast, spanning from a loss of nearly 1.30 to a loss of 35 cents per share, according to FactSet.

In comparison, rival company Airbus (AIR. France) is expected to report earnings per share ranging from $1.25 to $1.75. Unlike Boeing, Airbus isn't operating at a loss. The 50-cent difference between their per-share projections accounts for approximately 33% of the mid-range estimate.

Determining Boeing's earnings has become increasingly challenging in recent years, primarily due to the aftermath of the 2019 grounding of its 737 MAX following two tragic crashes in Indonesia and Ethiopia within a five-month period.

Boeing dedicated significant time to rectify the software and sensor issues associated with the grounding. Unfortunately, their progress was hindered by the pandemic's disruptive effects on the global supply chain. The company also lost skilled workers during this period, hampering efforts to ramp up production alongside Airbus in their respective facilities.

As investors eagerly await Boeing's second-quarter earnings report, all eyes will be on how the company navigates these challenges and strives towards a brighter future.

Boeing's Defense Business Facing Challenges

Boeing's defense business has recently encountered difficulties due to high inflation impacting profits on fixed-price contracts. This has resulted in a significant number of missed estimates, with 14 misses out of the past 17 quarters. This level of inconsistency is quite uncommon, especially when compared to Airbus, which has only missed estimates four times within the same timeframe.

Volatility in Boeing's Stock

The frequent misses in estimates have had a notable impact on Boeing's stock, causing volatility in its value. Over the past two years, shares have traded between approximately $113 and $241. The $128 difference between the high and low points represents nearly 70% of the average stock price during that period. In contrast, Airbus shares have ranged from approximately $87 to $135, with a difference of about 45% of their average stock price.

Surpassing Expectations in Commercial Jet Deliveries

Despite the challenges faced by the company, Boeing managed to deliver 136 commercial jets in the second quarter, exceeding Wall Street's projection of 103 deliveries. This positive performance in deliveries may contribute to an "earnings beat," which would provide some relief for the company.

Optimism Surrounding Commercial Aerospace Cycle

Before the earnings report, Boeing's stock had been performing well, driven by optimism surrounding the commercial aerospace cycle. Over the past 12 months, shares have gained 35%, surpassing the S&P 500's 15% growth and Dow Jones Industrial Average's 11% growth during the same period.

Conclusion

Boeing's defense business is currently facing challenges due to high inflation impacting profits on fixed-price contracts. The company has experienced a significant number of missed estimates, leading to volatility in its stock value. However, the positive performance in commercial jet deliveries provides some hope for a potential "earnings beat." Despite these obstacles, Boeing's stock has been performing well overall due to optimism surrounding the commercial aerospace cycle.