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Boeing’s Q3 Commercial Deliveries Up Y/Y, Defense Order Lags


The Boeing Company BA reported third-quarter 2017 deliveries, wherein commercial shipments were up 7.4% on a year-over-year basis. However, defense shipments were 12% lower than the year-ago figure.

Commercial Deliveries

The year-over-year improvement was primarily driven by higher deliveries of 737 model. Boeing’s other models 777, 787 and 767 jets, registered marginal year-over-year drop in deliveries. In the reported quarter, the company delivered 202 airplanes.

Delivery of the single-aisle 737 jets improved to 145 from 120 a year ago. Shipments of the 777 and 787 Dreamliners were 16 and 35 compared with 22 and 36 in the year-ago period, respectively. The company delivered two 767 jets compared with five in the year-ago quarter. Deliveries of 747 jets were four compared with five in the year-ago period.

Year to date, commercial deliveries were 554 airplanes compared with 563 in the year-ago period.

Commercial Order & Backlog

A look at Boeing’s third-quarter order details reveals that the company booked 127 net commercial orders (accounting for cancellations). This reflects a drop from the year-ago figure of 150.

At the end of third quarter, the backlog of commercial airplanes touched 5,679. This clearly indicates the dominance and popularity of Boeing in commercial aerospace. The customers are willing to wait for years to get delivery for the high quality aeroplane Boeing offers.

Defense Deliveries

It is to be noted that in the defense and space business, Boeing’s deliveries totaled 44 in the third quarter compared with 50 in the year-ago quarter. Total deliveries consisted of 18 AH-64 Apache helicopters (both new and remanufactured) and 11 Chinook helicopters (new and renewed). In addition, the company delivered six F/A-18s, five P-8 models and four F-15s.

Development in Defense Space

We expect that the new development in the defense space is likely to increase the defense orders for Boeing.

The Senate has approved a $700 billion National Defense Authorization Act, which provides necessary funding to the U.S. Military to carry out activities in homeland and overseas. The bill authorizes $640 billion for national defense spending and $60 billion for Overseas Contingency Operations.

The new bill authorizes $2.9 billion for procuring 17 KC – 46A tankers, which is $400 million and two tankers more than the administration’s request. It also authorizes $3 billion for Army helicopters, including nearly $1.8 billion for different variant of Chinooks Helicopters. Boeing is going to directly benefit from this development.

Price Movement

Share price of Boeing has increased 93.4% in the last 12 months, outperforming the Zacks Aerospace–Defense industry’s gain of 52.3%.

This could be because the company’s strong balance sheet and cash flows provide financial flexibility in matters of incremental dividend, ongoing share repurchases and earnings accretive acquisitions.

Our View

Boeing anticipates that in next two decades, the world will need 41,030 new planes, worth $6.1 trillion. The company expects cost effective single-aisle jets to be the major driver behind demand growth, comprising 72% of the total projection. This translates into worldwide demand for 29,530 single-aisle jets, worth $3.2 trillion.

We believe Boeing, with its high quality single-isle 737 model, is well placed to capture a large share of the new orders of commercial jets.

Zacks Rank & Stocks to Consider

Boeing currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the same space include General Dynamics Corp. GD, Northrop Grumman Corp. NOC and Huntington Ingalls Industries, Inc. HII, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

General Dynamics surpassed estimates in three of last four quarters with an average positive surprise of 3.67%. The company's 2017 estimates moved up 0.1% to $9.79 in the last 60 days.

Northrop Grumman surpassed estimates in the last four quarters with an average positive surprise of 12.6%. The company's 2017 estimates climbed 0.6% to $12.53 in the last 60 days.

Huntington Ingalls surpassed estimates in two of last four quarters with an average positive surprise of 8.56%. The company's 2017 estimates moved up 0.4% to $11.59 in the last 60 days.

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