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Why Boeing Stock Just Jumped More Than 8%

By Rich Smith – Jul 26, 2017 at 12:40PM

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Hint: Earnings!

What happened

Following the release of the aircraft manufacturer's second-quarter earnings, shares of Boeing (BA -3.39%) were up 8.2% as of 12:15 p.m. EDT.

So what

Boeing just flew in a monster load of Q2 profits. As the company reported this morning, fiscal second-quarter profits of $2.89 per share were infinitely better than the $0.39 per share Boeing reported losing in last year's fiscal Q2. For the first half of this year, Boeing's GAAP profits of $5.22 per share are running roughly 2.5 times ahead of the $1.51 per share than Boeing had earned by this time last year.

That said, Q2 revenue of $22.7 billion was down 8.5% year over year, while H1 revenue of $43.7 billion is down 8.2% against last year's first half.

Relative to Wall Street's estimates, Boeing beat on earnings (analysts were looking for profits of $2.32 per share) but missed on revenue (analysts had predicted Boeing's sales would exceed $23 billion).

Boeing 787

Boeing shares take flight. Image source: Getty Images.

Now what

Despite the revenue miss, Boeing maintained its guidance for full-year sales of $90.5 billion to $92.5 billion. With profits rolling in stronger than expected, meanwhile, Boeing raised its guidance for full-year earnings. The aerospace giant now expects to earn anywhere from $11.10 to $11.30 per share this year, up about $0.75 per share from previous expectations.

This story only gets better as we turn to Boeing's cash flow statement. In Q2, Boeing generated $5 billion in operating cash flow (55% better than in last year's Q2), and spent only $439 million of it on capital investment. This left Boeing with positive free cash flow of $4.5 billion for the quarter, and brought H1 FCF up to $6.1 billion -- twice the amount of cash profit Boeing had generated by this time last year.

Management now expects to generate $12.25 billion in operating cash flow by year-end, invest $2 billion of that in capital expenditures, and thus generate positive free cash flow in excess of $10.2 billion by year-end. At a market capitalization of only $138.8 billion -- only 13.6 times free cash flow -- I'm sticking with my previous recommendation: Profitable and growing more so by the day, Boeing stock is a bargain.

Rich Smith has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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The Boeing Company
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