$BA Earnings

Boeing will report Q3 results before the bell tomorrow (released results last quarter at 7:30am ET). The co has a conference call scheduled to follow at 11:30am ET. 

Cap IQ Consensus estimates Q3 EPS of $2.62 (vs. $2.52 in 3Q15) w/revs of $23.60 bln ( -8.7% y/y).

In the Q2 earnings release, co lowers FY16 EPS to $6.10-6.30 from $8.15-8.35 vs. the $8.50 consensus; reaffirms FY16 revs of $93-95 bln vs. the $93.84 bln Consensus; reaffirms 740-745 commercial airplane deliveries but lowers operating margin to 4.5-5% from 9%.

BA was initiated with an Outperform at Robert W. Baird; tgt $161. Firm believes the FCF dynamic at BA continues to be underappreciated especially with $25 billion in FCF being generated during 2017-19 with ~$17 billion available for buybacks after dividends. Ramping build rates, seven-year backlog visibility with record low deferral rates, stable R&D costs, and productivity improvements lend to returning significant cash to shareholders. Their price target is $161 based on 11x their 2018 FCF estimate. Buying the pullback in BA shares as bear points priced in at current levels (October 6th).

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Boeing reports Q3 (Sep) results, beats on revs; reaffirms FY16 EP ex-tax benefit; raises rev on higher commercial deliveries  

• Reports Q3 (Sep) earnings of $3.51 per share, including $.98 in favorable tax items, may not be comparable to the Capital IQ Consensus of $2.62; revenues fell 7.5% year/year to $23.9 bln vs the $23.6 bln Capital IQ Consensus.
• Co issues reaffirms guidance for FY16, sees EPS of $6.10-6.30 ex-$0.70 favorable tax adjustment vs. $6.29 Capital IQ Consensus Estimate; raises FY16 revs $500 mln to $93.5-95.5 bln vs. $94.04 bln Capital IQ Consensus on higher commercial deliveries: to 745-750 from 740-745. 

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Call Notes

• Co anticipates modest U.S. Federal defense spending growth in the next five years.
• Regarding the 747 program, the co is encouraged by modest recovery in the air cargo market.
• Co delivered 188 commercial airplanes in the quarter. 
• Defense, space and security orders valued at $6 billion with a backlog of $53 billion
• 38% of business comes from customers outside of the United States.
• Co paid $700 mln in dividends, repurchased 51 million shares during the quarter for a total of $6.5 billion.
• So far in 2016 co has added 17 net new 777 orders, on track to transition to 7 per month.
• Encouraged by recent Qatar airways decision for 10 777s. 
• Co will provide FY17 guidance during the Q4 earnings call.