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Key Takeaways
- Analysts estimate adjusted EPS of -$1.70 vs. -$2.33 in Q4 2019.
- Commercial airplane deliveries declined YOY.
- Revenue has plunged due to COVID-19 and 737 MAX grounding.
Boeing Co. (BA), one of the world’s largest airplane manufacturers, is coming off a difficult year in which it struggled with two major crises: reduced demand for new aircraft due to the pandemic-induced plunge in air travel and the continued grounding of the company’s 737 MAX aircraft, which was involved in two fatal crashes. But things may be starting to look up for Boeing. The rollout of new COVID-19 vaccines could open the door to more air travel, and the 737 MAX ban was recently lifted by the U.S. government.
While it may be some time before air travel fully recovers, investors will be looking for signs that Boeing has been able to limit the damage to its financial results when the company reports earnings on January 27, 2021 for Q4 FY 2020. Analysts are expecting another adjusted loss per share as revenue continues to fall, albeit at a much slower pace than in recent quarters.
Another key metric of interest to investors is the number of commercial airplanes Boeing delivered during the quarter. Boeing’s fourth-quarter deliveries report, issued earlier this month, showed a mixed picture. The total number of commercial airplane deliveries fell on a year-over-year (YOY) basis. But a promising sign is that those deliveries were more than double the number completed in Q3 FY 2020.
Shares of the aircraft manufacturer have lagged the broader market over the past year. The stock was off to a good start early last year, but the pandemic-induced market crash between late February and late March 2020 sent the stock tumbling. It has yet to fully recover. Boeing’s shares have provided a total return of -33.4% over the past 12 months, well below the S&P 500’s total return of 16.0%.
Source: TradingView.
The stock initially fell after Boeing reported financial results for Q3 FY 2020, which were better than expected. The company posted an adjusted loss per share of $1.39, marking the fourth consecutive quarter of losses. Revenue fell 29.2%, the seventh consecutive quarter of YOY declines. In Q3, however, revenue posted a significant increase compared to Q2 FY 2020. Boeing noted that its financial results continued to be significantly impacted by the pandemic and the 737 MAX grounding.
Q2 FY 2020 was even more difficult for Boeing. The company posted an adjusted loss per share of $4.79. Revenue declined 25.0% to $11.8 billion, the lowest revenue level for any quarter in at least three years. The stock fell on the news and despite some brief surges trended lower over the next three months.
Analysts expect another loss and drop in revenue in Q4 FY 2020. The adjusted loss per share is forecast to be $1.70 as revenue falls 15.5%. For full-year FY 2020, the adjusted loss per share is expected to be $9.71, nearly three times the loss posted in FY 2019. Annual revenue is expected to decline 24.3% for the second year in a row.
| Boeing Key Metrics | |||
|---|---|---|---|
| Q4 2020 (FY) | Q4 2019 (FY) | Q4 2018 (FY) | |
| Adjusted Earnings Per Share ($) | -1.70 (estimate) | -2.33 | 5.48 |
| Revenue ($B) | 15.1 (estimate) | 17.9 | 28.3 |
| Commercial Airplane Deliveries | 59 (actual) | 79 | 238 |
Source: Visible Alpha; Boeing.
As mentioned above, Boeing’s commercial airplane deliveries are also a key metric watched by investors. Boeing manufactures both commercial and military aircraft. Demand for the former type is much more sensitive to economic conditions whereas demand for the latter depends on government policy decisions regarding its military program. Global travel restrictions related to the pandemic have caused a major contraction in air travel, reducing demand for new commercial aircraft. While travel restrictions have eased since the start of the pandemic and the successful rollout of vaccinations could lead to more restrictions being lifted some time this year, the economic fallout from the pandemic may hinder any sharp rebound to air travel.
The pandemic has compounded Boeing’s deliveries problems, which began after the 737 MAX air crashes that led to its grounding by U.S. and global regulators. Prior to the grounding, Boeing delivered a total of 238 commercial airplanes in the final quarter of 2018. That number fell to 149 in the first quarter of 2019. By Q4 FY 2019, before the pandemic, total commercial airplane deliveries had fallen 66.8% YOY. Commercial airplane deliveries in Q2 FY 2020 were down 77.8% YOY to a total of 20, the lowest number of deliveries in at least 15 quarters. Q4 FY 2020 deliveries improved to 59, but are still down YOY. The FAA has lifted its ban on the 737 MAX and Europe is set to lift its ban before the end of the month, but now Boeing is dealing with manufacturing issues related to its 787 Dreamliner that have delayed deliveries. Combined with the negative impact of the pandemic, these headwinds indicate that Boeing’s deliveries may not fully recover anytime soon.
