The Boeing Company (BA) has shown resilience in its core businesses with third quarter fiscal 2010 earnings of $1.12 per share, outpacing the Zacks Consensus Estimate of $1.07. The company’s results reflect higher Commercial Airplanes volume and strong performance across its core businesses.

In the year-ago quarter, performance was wayward, with Boeing clocking a loss of $2.22 per share due to reclassification of research and development costs of $2.60 per share incurred for the first three 787-series test airplanes. The company also digested a charge of 99 cents per share from the delay in producing a new version of the 747-8 series freighter jet leading to late design changes.

The street was bullish on Boeing’s ability to report stable quarterly numbers with the steady recovery in the U.S. and Canadian economies. As a result, Boeing’s quarterly revenue increased 2% year-over-year to approximately $17 billion, $212 million higher than the Zacks Consensus Estimate of $16.8 billion.

Segmental Results

Commercial Airplanes

Boeing’s Commercial Airplane segment in the reported quarter saw a stark 10% rise in deliveries to 124 units. During the period, higher numbers of 737 and 777 airplanes flew out of Boeing without a single 747 during the quarter. Higher airplane deliveries along with northward services volume pulled revenue 11% upward to $8.7 billion.

The segmental operating margin was 11.6% from higher deliveries and continued strong operating performance. The prior-year quarterly results were impacted by a $2.6 billion 787 R&D reclassification and a $1.0 billion 747 charge, resulting in a negative operating margin of 36%.

Boeing’s Commercial Airplane segment in the reported quarter booked 257 gross orders while 36 orders were removed from its order book.  These contrast with the year-ago period when net orders were for 79 airplanes. Contractual backlog remains strong with 3,401 airplanes valued at $255 billion, more than seven times the unit’s projected fiscal 2010 revenues.

Boeing Defense, Space & Security

Boeing Defense, Space & Security segment witnessed an 6% drop in its quarterly revenues to $8.2 billion. This was due to lower volume resulting in lower sales in Network & Space Systems (N&SS) and Boeing Military Aircraft (BMA) sub-segments, while Global Services & Support (GS&S) witnessed a marginal spike. Margins also contracted to 8.4% from 10.1% year-over-year.

BMA’s quarterly revenues decreased 5% to $3.8 billion driven by fewer deliveries and a less favorable mix on the C-17 program. Operating margin was 8.2% impacted by lower pricing and mix on the C-17. 

N&SS’s quarterly revenues were $2.3 billion, reduced by expected lower volume on Brigade Combat Team Modernization (BCTM) and Ground-based Midcourse Defense (GMD) programs. Operating margin was 6.5% on lower BCTM and GMD earnings. 

Global Services & Support (GS&S) revenues stood at $2 billion in the reported quarter. Operating margin increased to 10.7%, driven by strong performance in integrated logistics and maintenance, modifications and upgrades.

Backlog at Defense, Space & Security is $65.6 billion, approximately two times the segment’s projected fiscal 2010 revenues. The backlog increased by $5 billion during the reported quarter driven by the F/A-18 fighter jet multi-year contract award.

Boeing Capital Corporation (BCC)

Boeing Capital Corporation reported quarterly revenues of $170 million compared to $166 million in the year-ago quarter. The segment generated earnings of $45 million compared to $39 million in the year-ago period. During the quarter, BCC’s portfolio balance declined to $5 billion, down from $5.7 billion at year end, on normal run-off, asset pre-payments and depreciation.

Financial Condition

Boeing ended the quarter with cash and cash equivalents of $2.9 billion and short term investments of $7.1 billion. At year-end fiscal 2009, the company had $9.2 billion in cash and cash equivalents and $2 billion of short term investments.

The company generated $1.8 billion of cash from operating activities in the first nine months of 2010, compared to $2.4 billion generated in the year-ago period. Long-term debt decreased to $11.5 billion at the end of the quarter from $12.2 billion at the end of fiscal 2009.

Outlook

Boeing has a unique position as the largest aircraft manufacturer in the world in terms of revenues, orders and deliveries, and one of the largest aerospace and defense contractors in the world. Also its revenues are spread across more than 90 countries around the globe.

Boeing raised its fiscal 2010 earnings per share guidance range to $3.80 – $4.00 per share from its earlier guidance range of $3.50 – $3.80. Revenue guidance range was narrowed to $64.5 billion – $65.5 billion, from its earlier guidance range of $64 billion – $66 billion.

We are currently Neutral on the Zacks #3 Rank stock.

 
BOEING CO (BA): Free Stock Analysis Report
 
Zacks Investment Research