Boeing Q3 preview: Where next for the Boeing share price?
Joshua Warner October 26, 2021 7:27 AM
Boeing is plagued by problems with the 787 and this is expected to continue to weigh on its results in the third quarter, providing an opportunity for European rival Airbus. We explain what to expect this week and consider how Boeing shares could react.
When will Boeing release Q3 earnings?
Boeing will release third quarter earnings before markets open on Wednesday October 27.
Boeing Q3 earnings preview: what to expect from the results
Boeing delivered 85 commercial airplanes in the third quarter, having risen from the 79 shipped in the second and 77 delivered in the first. That means Boeing has sold 241 commercial airplanes in the first nine months of the year, more than double the 98 it had sold at this point last year.
Deliveries of 737s has been the main driver behind the steady growth seen this year, but this has been overshadowed by the lack of 787 deliveries. Boeing has been scrambling to fix an array of problems with the model since late last year, ranging from tiny gaps on the body to weaker-than-expected titanium parts. The regulator has been closely-watching Boeing as it looks to fix the issues and, as a result, the company only managed to deliver 14 787s in the first half - with none being shipped in the third quarter.
That will do nothing to stem the amount of cash Boeing is burning though in what is already a tough environment for the industry as it continues its slow and steady recovery from the pandemic. The Wall Street Journal reported earlier this month that Boeing could have as much as $25 billion worth of 787s in inventory, which could cause Boeing to burn through $870 million in cash alone in the third quarter, according to a consensus from Bloomberg.
Boeing ended the second quarter with $21.3 billion of cash and marketable securities but analysts think this could drop below $18 billion by the end of the third.
Wall Street is expecting Boeing to report a rise in revenue to $16.295 billion in the third quarter compared to $14.139 billion the year before, according to consensus numbers from Reuters.
Revenue from commercial aircraft is expected to come in around $5.300 billion, according to Bloomberg consensus figures. That would be up from $3.596 billion last year but mark a sharp 12% drop from the $6.015 billion reported in the second quarter. Meanwhile, its defence division selling Apache helicopters, Chinooks and jets is expected to report revenue of $6.92 billion compared to $6.85 billion last year and $8.87 billion in the previous quarter. Boeing’s services division is forecast to deliver revenue of $3.957 billion, down from $4.067 billion in the second quarter as the uneven recovery in the airline industry continues.
Analysts are expecting Boeing to book core net earnings of $506 million and turn from the $754 million loss booked a year earlier. They are anticipating Boeing will remain in the red with a core loss per share of $0.20, narrowing from a $1.39 loss last year.
GAAP EPS at the bottom-line is forecast to come in at $0.45 and turn from the $0.79 loss booked last year.
The outlook will be crucial for Boeing and this will depend on its ability to address the problems plaguing the 787s and resuming deliveries. Analysts at Fitch said last week that they believe Boeing’s debt has peaked and that it is through the worst of its cash burn following a tough 18 months, although they said reducing debt should be a priority as it leaves the company more exposed to the condition of the wider economy.
Still, Fitch believes the problems with the 787s is not as bad as the crisis that unfolded after fatal crashes resulted in lengthy groundings of its 737 Max planes, forecasting Boeing could start generating positive free cashflow again from the fourth quarter onwards if 787 deliveries resume. That could lead to an ‘abnormally high’ number of orders being made for the model in 2022 before dropping-off in 2023 and 2024.
Boeing shares are largely trading at a similar level now as they were at the start of 2021 and remain over 38% below their pre-pandemic levels. But brokers are extremely bullish on the stock and have an average Buy rating on Boeing and a target price of $266.63, implying there is over 25% potential upside from the current share price.
Where next for the Boeing share price?
After rising to a post pandemic high of $280 in mid-March, the Boeing share price has been steadily falling, forming a series of lower highs and lower lows.
The share price trades below its multi-month descending trendline and its 50 &200 sma. The 50 sma also crossed below the 200 sma in a bearish signal.
Failure to retake the 200 sma combined with a bearish RSI are keeping seller’s hopeful of further losses.
Bears will be looking for a move below $205 the July low to bring $192 into focus the year to date low.
Any meaningful recovery will need to retake the 50 sma at $218 and the falling trendline at $223 in order to expose the 200 sma at 228. A move above here could see the bulls gain traction.
Airbus Q3 earnings preview: what to expect from the results
Meanwhile, Airbus – Boeing’s only major competitor – is scheduled to release earnings covering the first nine months of 2021 on Thursday October 28. Thanks to Boeing’s problems, the European outfit has outperformed its US rival of late – having delivered more commercial planes in the first six months of 2021 than Boeing managed in the first nine months of the year.
The strong performance in the first half prompted Airbus to raise its guidance back in July, despite warning of the ‘unpredictable environment’. Airbus said it is aiming to deliver 600 commercial planes in 2021 as a whole and to deliver adjusted Ebit of EUR4.0 billion and free cashflow before M&A and customer financing of EUR2.0 billion. If achieved, that would compare to the adjusted Ebit of EUR1.7 billion and the hefty free cash outflow of EUR6.9 billion reported in 2020.
The results from Airbus will focus on the performance over the last nine months rather than the third quarter alone. Analysts are expecting Airbus to report revenue of EUR35.4 billion in the first three quarters compared to EUR30.2 billion the year before, with reported EPS of EUR3.27 forecast to turn from the EUR3.43 loss last year.
Airbus shares have rallied over 20% since the start of 2021 but remain down over 20% from pre-pandemic levels. Brokers are equally as bullish on Airbus as they are Boeing, with an average Buy rating and a price target of EUR136.48 implying there is over 26% potential upside from the current share price.
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