Boeing (BA) earnings preview: 737 Max to be the focus of Q3 results

The Boeing Company (NYSE: BA) is scheduled to report third quarter 2019 earnings results on Wednesday, October 23, before the market opens. Analysts expect the company to report earnings of $2.08 per share compared to EPS of $3.58 reported in the same period last year. Revenues are expected to drop 22% to $19.5 billion.

Read: Boeing Q3 2019 earnings results

The main focus of the third quarter results will be the 737 Max airplane grounding. The 737 issue will continue to impact production rates and revenues in the quarter. Boeing’s Q3 deliveries fell 67% year-over-year to 63 units in commercial airplanes.

The year-to-date numbers also saw a decline. Last quarter, Boeing’s commercial airplanes revenue fell 66% and the segment accounted for only 30% of total revenue versus 51% in the first quarter.

If the company incurs charges related to the 737 grounding, it could take a toll on earnings. The stoppage in deliveries can also impact cash flows in the quarter. The 737 was expected to resume service in Q4 but this has not yet happened, although it is early in the quarter.

Any delays in the return of the 737 will take a toll on suppliers and airlines. Boeing reportedly faces further regulatory scrutiny in light of recent whistleblower disclosures regarding 737 safety issues. Updates on the company’s plans in this area will be very important to investors. Boeing also faces higher material costs due to the tariffs which have led to price increases in steel and aluminum.

Earlier this month, the company separated the roles of Chairman and CEO. While Dennis Muilenburg continues as CEO, any details or changes to Boeing’s business plans due to this move will be of interest.

Also read: JetBlue Q3 2019 Earnings Preview

In the second quarter of 2019, Boeing’s revenues tumbled 35% to $15.7 billion, far below the estimated $18.5 billion. The company reported a loss of $5.82 per share. The top and bottom line numbers were hurt by the 737 grounding, with a $4.9 billion charge related to delivery delays taking a toll on profits.

Last quarter, the aircraft manufacturer refrained from giving a financial forecast, citing “uncertainty of the timing and conditions surrounding return to service of the 737 MAX fleet.”

Shares have dropped 13% in the past three months. The majority of analysts have rated the stock as Hold and the average 12-month price target is $400.54.

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