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Disappointing 2016 Guidance Sends The Boeing Co. Investors Running

By Daniel Miller - Jan 27, 2016 at 11:20AM

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Despite weaker-than-anticipated guidance for 2016, Boeing's Q4 figures weren't all that bad.

What: Shares of The Boeing Co. (BA 1.27%) dipped 10% during early morning trading on Wednesday, setting the aviation juggernaut's 52-week low at $115.02 before recovering slightly.

So what: While the company's stock price was taking a hit, the company's fourth-quarter and full-year results were strong for the most part. Boeing's revenue checked in at $23.57 billion in the fourth quarter, which was down from last year's $24.47 result, but still in line with Wall Street estimates.

Because of a $0.84 per share one-time after-tax charge, due to Boeing's 747 production cut, Boeing's core earnings per share, which excludes pension and other costs, declined 31% to $1.60 during the fourth quarter. Still, that $1.60 was much higher than the consensus forecast of core EPS of $1.26, according to Thomson Reuters.

The real issue driving Boeing's stock price lower this morning was its 2016 full-year guidance, which investors felt was disappointing. More specifically, Boeing forecast its 2016 core earnings to check in between $8.15 and $8.35 per share, which was well below Thomson Reuters consensus estimate of $9.43.

Now what: While the initial 2016 guidance is worrisome for investors, Boeing has historically been conservative with its initial guidance, and the company could very well increase its guidance throughout the year. One thing to watch will be Boeing's cash flow, which it estimates will total about $10 billion in operating cash flow this year. If Boeing falls short of that, expect more analysts to raise a red flag similar to Robert Stallard in his note to investors below.

"Whilst we don't expect this to negatively impact Boeing's existing plans to return cash to shareholders, it could create doubt as to the sustainability of these plans," RBC analyst Robert Stallard wrote in a note, according to Reuters.

Daniel Miller has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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