The Boeing Company Earnings: Can They Fly Even Higher?

On Wednesday, Boeing (NYSE: BA  ) will release its quarterly report, and investors are bracing for a decline in earnings even though revenue continues to power ahead. The real question for Boeing investors, though, is whether the aerospace giant can stay ahead of rival Airbus on the commercial side as well as Lockheed Martin (NYSE: LMT  ) and other defense-sector peers on the military side. The key to Boeing's eventual success will be to follow through on orders it already has in its extensive backlog.

From a macroeconomic perspective, Boeing is more than just a company. It represents a critical part of the U.S. economy, with major companies General Electric (NYSE: GE  ) and United Technologies (NYSE: UTX  ) getting a huge amount of their own aerospace business from work for the aircraft-manufacturing giant. But if Boeing starts to fall, it could spell problems for a wide swath of related businesses. Let's take an early look at what's been happening with Boeing over the past quarter and what we're likely to see in its report.


Source: Boeing.

Stats on Boeing

Analyst EPS Estimate

$1.56

Change From Year-Ago EPS

(9.8%)

Revenue Estimate

$20.19 billion

Change From Year-Ago Revenue

6.9%

Earnings Beats in Past Four Quarters

4

Source: Yahoo! Finance.

Will Boeing earnings take flight?
In recent months, analysts have gotten quite pessimistic in their views on Boeing earnings, cutting their first-quarter estimates by 10% and reducing full-year 2014 and 2015 projections by 1%-3%. The stock has also pulled back, falling 8% since mid-January.

Boeing's fourth-quarter-earnings report got 2014 started on the wrong foot as investors ignored strong performance at the end of 2013 and focused instead on slowing core earnings-per-share growth guidance for 2014. Even though Boeing has lowballed its early earnings projections in the past, Boeing shareholders have had an itchy trigger finger in light of the huge gains its stock gave them last year. Although Boeing's commercial aircraft unit appears well poised for future growth, Boeing's defense business has taken hits from government budget cuts and increasing competition, giving bearish shareholders an argument to support their lack of confidence going forward.

Source: Boeing.

In order to boost revenue and earnings, Boeing faces a tough order: ramping up its production so that it can clear through its massive backlog and deliver aircraft in a more timely fashion. Boeing has already said that it delivered 161 commercial airplanes in the first quarter, up 18% from the year-ago quarter. Yet although deliveries of next-generation 737 aircraft appear to be going strong, 787 Dreamliner deliveries actually fell compared to the fourth quarter of 2013. Until Boeing can dependably boost production without sacrificing quality, it will have trouble realizing the full potential of its current growth opportunity, and that has negative implications for General Electric, United Technologies, and countless smaller suppliers that rely on Boeing for much of their business in the aircraft industry.

Fortunately, Boeing sees no end to demand for commercial aircraft. Boeing has highlighted the Asia-Pacific region as a huge growth prospect, with more than a third of its deliveries in the next two decades coming from that region according to its estimates. Although Airbus will undoubtedly fight for market share, Boeing has managed to deliver more aircraft than Airbus in recent years, giving Boeing more leverage to attract future orders.

At the same time, Boeing is still looking to bolster its military prowess. With recent attempts to have the U.S. government add appropriations for its EA-18G Growler attack plane, it hopes to unseat Lockheed Martin's F-35 fighter -- or at least take a portion of its massive budget allocation.

In the Boeing earnings report, watch to see how the company expects to bolster deliveries further and address quality concerns that have plagued the manufacturer for more than a year now. For now, it appears that Boeing stock is taking a pause from its huge gains, but it will need to demonstrate its continued superiority in order to produce another year of good returns for shareholders.

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