The press release is here.
With advance warning last week, Boeing stock was up $2.95 in pre-market trading today an hour before its earnings call.
Boeing’s press release synopsis:
Some initial analyst takes:
Bernstein Research (Outperform)
The earnings release looks positive ahead of the earnings conference call, with Boeing effectively increasing EPS guidance for the year by more than $1/share, after adjusting for the previously-announced charges (which are mostly non-cash); and reducing 787 deferred production cost by nearly $200 million more than we expected. We rate Boeing Outperform, target $176. We expect strong cash flow growth, with the 787 a key driver. Narrowbody demand remains strong, but our estimates are revised down slightly due to widebody weakness. Defense sales should be roughly flat with upside pote
Buckingham Research (Neutral)
We reiterate our NEUTRAL rating following BA’s 2Q16 earnings. While we remain neutral, we are getting increasingly negative as BA share price has risen in recent weeks despite weak orders, continued charges, FCF headwinds, and the potential for production rate cuts. We think the stock will trade up again today on a 2Q solid beat versus consensus. While BA beat consensus (ex the charges) and raised its 2016 guidance (ex the charges), we think one concern will be that BA did not raise its 2016 CFO guide of $10B. In addition, nothing in BA’s 2Q report changes our overall and long-term expectations for lower than expected widebody production rates, slowing advances, and lower than expected FCF.
787 Deferred Production rises ~$33M excluding 787 charges – this implies unit deferred is down to ~$1M.
At 27.7B, deferred production was ~$1B lower than Q1, but this was attributable to the charges on 787 (reflecting the write-down on test aircraft 4 and 5).
Excluding the charges, it appears that deferred production rose by ~$33M implying that unit deferred production is down to ~$1M (versus $4.7M in Q4) – a nice improvement.
Goldman Sachs (Sell)
The 787 deferred production balance decreased to $27.673bn from $28.651bn last quarter. That is a reduction of $978mn. The pre tax 787 reclassification charge, which comes out of deferred, was $1.235bn. Boeing says the all in change to deferred from the reclassification is $1.011bn, a $33mn qoq increase, with the program adjustment partially offsetting the unit adjustment. It is unclear to us that program adjustment from this item reflects recurring / ongoing 787 deferred improvement. Last quarter’s sequential change in 787 deferred was $141mn and our estimate for this quarter was $100mn.
Morgan Stanley (Neutral)
Boeing’s Q2 results were solid operationally (ex-preannounced charges) with upside to earnings expectations in Commercial and Defense. In addition, the core EPS guidance reduction was well below the Q2 charges, with most of the upside from Defense, tax, and other company-wide items. The better than expected results and guidance ex charges combined with the fact that the stock is near a resistance level could set up for upside today but the key debates here are unlikely to change much. (Please see the variance table on page 2.)
Free Cash Flow (FCF) of $2.5bn was 8% above our forecast. As previously disclosed, 2016 cash from ops guidance was unchanged at $10bn. News earlier this week that Boeing has delayed payments to suppliers should fuel an ongoing debate about sustainable cash flow here but the result was in line with our forecast and puts Boeing on track to the 2016 guidance.