The Boeing Company (BA) lost orders for 26 jetliners in July 2010. Dubai Aerospace Enterprise alone cancelled 25 orders while another customer canceled one single-aisle 737.
Of the 25 orders cancelled by the aircraft-leasing company of the United Arab Emirates, 15 were new 787 jetliners and 10 were wide-body 777 jetliners. There are still 91 airplanes on order with Boeing from Dubai Aerospace.
However, Boeing received two new orders for the 737 jetliners in July.
Given the order cancellation of the 15, 787 jetliners, Commercial Revenues will likely be reduced by $2.3 billion – $3.1 billion. Also, revenues will be dented by the 777 and 737 order cancellations. The list prices for the 777 and 737 jetliners range from $2.1 billion to $2.9 billion. The segment had suffered a year-over-year revenue decline of 11.8% in the second quarter of 2010 largely due to lower planned deliveries on the 747 program and lower deliveries on the 737 and 777 programs.
Boeing suffered 32 cancellations compared with 28 new orders year to date for its 787 jetliner. However, across the portfolio, the company’s new orders totaled 319 compared with only 64 cancellations.
One of the nearest competitors of the company, Airbus, also suffered order cancellation from Dubai Aerospace. Dubai Aerospace cancelled orders for 25 planes – 18 for the medium-range A320 and 7 for the long-range A350. There are still 75 airplanes on order at Airbus from Dubai Aerospace.
During the second-quarter conference call, Boeing provided its revenue guidance in the range of $64 billion to $66 billion for fiscal 2010. The company also provided earnings per share guidance in the range of $3.50 to $3.80 for full year 2010.
The Zacks Consensus Estimate for third-quarter 2010 is earnings of $1.03 per share. For full years 2010 and 2011, the Zacks Consensus Estimates are respectively, $3.90 per share and $4.91 per share.
Given the order cancellations that would put revenue under pressure and the added threat of a proposed cut in U.S. defense expenses of roughly $100 billion over the next five years, we maintain our “Neutral” recommendation on Boeing. The quantitative Zacks Rank for the company is currently “3”, indicating no clear directional pressure on the shares over the near term.
Headquartered in Chicago, The Boeing Company designs and produces commercial airplanes (787, 737, 747, 767, 777), defense systems and civil and defense space systems. It is also the largest contractor for NASA (National Aeronautics and Space Administration). Its competitors include Lockheed Martin Corporation (LMT) and Northrop Grumman Corporation (NOC).
BOEING CO (BA): Free Stock Analysis Report
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