Oct. 25, 2017: Boeing announced strong earnings for the third quarter and nine months ending Sept. 30, including the first break-out of Boeing Global Services.
The press release may be seen here.
JP Morgan’s initial take:
Boeing’s Q3 report looks solid and largely meets our expectations on several fronts including implied cash flow and core EPS for 2017 and (we believe) 787 cash flow. The stock has performed well into the print, however, and so it is not clear that modestly higher guidance will drive much outperformance today. Boeing took another tanker charge (~$250 mn), but this is not a major surprise and lower R&D roughly offsets the EBIT impact.
- BA raised FCF guide $250 mn to >$12.5 bn. This new guidance is about in line with our expectations into today, and given a track record of beating guidance, Street estimates could move modestly higher. The new guide implies just over $2 bn of Q4 cash from ops, which would be down y/y, but Q3 beat our estimate by $900 mn and cash flow is lumpy. Given Boeing’s guidance for annual cash from ops growth through 2020, each boost to 2017 raises the baseline for future growth.
- Core EPS move up 10c to ~$10.00 at the midpoint. Sell-side estimates are already here, and so we could see consensus move a bit higher. Boeing took a ~$250 mn charge on the Tanker, but this is more than offset by lower R&D expense and a lower tax rate.
- 787 deferred balance came down ~$515 mn. We had estimated ~$500 mn, and so the result looks solid as we had expected performance here to moderate with Boeing booking more cash profits on the income statement following the extension of the accounting quantity. We estimate this equates to total program cash flow of almost $800 mn in Q3, or a mid- to upper-teens cash margin.
First look at Global Services. Boeing reported Services revenue of $3.6 bn in the quarter with a ~14% margin. We would note that YTD Services growth stands at 1%, and so Boeing’s growth plans for this segment are still taking shape