Now that Christmas is out of the way, it's time for that other "most wonderful time... of the year" -- year-end earnings season, when those companies whose fiscal years align sensibly with the calendar version report their fourth-quarter and full-year results. Next up is Boeing (NYSE:BA), which reports bright and early Wednesday morning.

What analysts say:

  • Buy, sell, or waffle? Twenty-three analysts keep Boeing on their radar. Of these, 13 rate the stock a buy, seven say hold, and three more sell.
  • Revenues. On average, the analysts expect to see 16% quarterly sales growth to $16.46 billion
  • Earnings. Profits are predicted to soar 69% to $0.98 per share.

What management says:
In its third-quarter earnings report, Boeing forecast "strong performance from its core businesses" through the end of 2006 and 2007. It aims to close out this year with approximately $60.5 billion in revenues, maxing out its previous guidance, and to book between $65.5 billion and $66.0 billion in 2007. Profits-wise, the targets are $2.40 to $2.50 per share in 2006, and $4.45 to $4.65 in 2007.

Moving from GAAP numbers to cash profits, management predicts better than $5.5 billion in operating cash flow both this year and next. Subtract out the $1.6 billion Boeing will spend on capital expenditures this year, and the $1.5 billion in 2007, and we're probably looking at flat free cash flows of roughly $4 billion in both years.

What management does:
If you're looking for a high-margin industry, keep your eyes fixed on the ground -- even a near-duopolist like Boeing has to content itself with single-digit profit margins in the aerospace sector. Last quarter, the firm announced that it's encountering problems with weight and compliance with customer specs on its new 787 airliner and will need to spend more on research and development to address these problems. That announcement suggests that operating and net margins may be dragged down further in the quarters to come.

Margins

6/05

9/05

12/05

3/06

6/06

9/06

Gross

14.8%

14.9%

15.7%

16.3%

15.9%

17.0%

Operating

5.3%

4.0%

5.6%

5.9%

5.0%

6.4%

Net

3.2%

4.3%

4.7%

4.8%

3.5%

2.9%
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
For a firm so clearly ascendant over its main rival, Airbus, Boeing's margin trends look awfully confusing. The general trend appears to be upwards at the gross margin level, but operating margins are all over the map. The reason: In addition to the additional, unanticipated R&D costs, the company suffers from a long history of large "one-time" charges to earnings that tend to jerk its operating margins around. Over the six most recent quarters shown above, for example, "unusual items" total charges of $1.2 billion for losses on sale of assets (primarily, Connexion), legal settlements, and "other unusual items." Offsetting these charges somewhat have been $600 million or so in one-time benefits to earnings, primarily a gain on sale of assets recorded in the September 2005 quarter.

Reviewing Boeing's earnings history, I see that such one-time items usually are one-time. It's been a few years since the last time we saw such significant charges and benefits coming all in a row. But until the firm gets its act back together on this front, Foolish investors might be best advised to pay less attention to the GAAP numbers, and focus on Boeing's cash profits, its free cash flow. Seems to me you'll get a more transparent picture of how successful its operations are there.

Competitors:

  • Raytheon (NYSE:RTN)
  • Northrop Grumman (NYSE:NOC)
  • Lockheed Martin (NYSE:LMT)
  • Embraer (NYSE:ERJ)
  • General Dynamics (NYSE:GD)
  • SpaceHab (NASDAQ:SPAB)

What did we expect out of Boeing last quarter, and what did it produce? Find out in:

Embraer is a Stock Advisor recommendation. For more promising stock picks from Fool co-founders Tom and David Gardner, sign up today for a free 30-day trial subscription.

Fool contributor Rich Smith does not own shares of any company named above.