Key Takeaways

  • Analysts estimate adjusted EPS of -$0.79 vs. -$4.79 in Q2 FY 2020.
  • Commercial airplane deliveries are expected to rise YOY.
  • Revenue is expected to rise for the first time since the final quarter of FY 2018 amid a recovery in demand for commercial aircraft following last year's COVID-19 shock.

Boeing Co. (BA) is seeing increased demand for commercial aircraft as global passenger travel recovers from a near standstill at the height of the COVID-19 pandemic in the U.S. That's an encouraging trend for the aircraft manufacturer, which has suffered a string of quarterly losses and revenue declines. At the same time, the speed of Boeing's recovery is being slowed by ongoing quality issues with its 787 Dreamliner and 737 MAX jetliner. That's a big reason Boeing is lagging behind major rival Airbus SE (EADSY) in aircraft deliveries.

Investors will focus on how Boeing is addressing its quality issues, as well as its financial performance, when it reports earnings before the market on July 28, 2021 for Q2 FY 2021. Analysts expect the company to report its seventh straight quarterly adjusted loss per share. However, revenue is expected to rise for the first time since the final quarter of FY 2018.

Investors will also focus on Boeing's commercial airplane deliveries, a key metric that measures the level of demand for one of the company's main products. Analysts expect a sharp rise in deliveries compared to the year-ago quarter. But total deliveries are likely to be below their levels both prior to the peak of the pandemic, and before the grounding in early 2019 of the 737 MAX aircraft following two fatal crashes.

Boeing's shares have lagged the broader market over the past year. But the stock's underperformance is only recent. The stock has been extremely volatile throughout the past year, but was able to sustain a period of outperformance from early February through the first few weeks of July. Shares of Boeing have provided a total return of 32.7% over the past year, below the S&P 500's total return of 36.5%.

One Year Total Return for S&P 500 and Boeing
Source: TradingView.

Boeing Earnings History

The stock sank after Boeing missed analysts' expectations for Q1 FY 2021. The company posted its sixth straight quarterly adjusted loss per share as revenue fell 10.0% year over year (YOY), marking the ninth straight quarter of declining revenue. Boeing said that lower 787 deliveries and commercial services volume contributed to the revenue decline, which was partially offset by higher 737 deliveries.

In Q4 FY 2020, Boeing missed analysts' adjusted earnings per share (EPS) estimates by a wide margin despite beating revenue expectations. The company posted its biggest adjusted loss per share in at least 14 quarters. Revenue fell 14.6% compared to the year-ago quarter. Boeing said that its financial results were significantly impacted by the pandemic as well as the grounding of the 737 MAX. However, the company also noted that the 737 MAX received regulatory approval to return to service after being grounded for nearly two years .

Analysts expect significant improvement in Boeing's financial performance in Q2 FY 2021. The company's adjusted loss per share is expected to narrow considerably compared to the same quarter a year earlier. However, it would be the seventh straight quarter of adjusted losses per share. Revenue is expected to rise 43.1%, which would be the first revenue growth in ten quarters. For full-year FY 2021, analysts are currently expecting Boeing to post its third straight annual adjusted loss per share, although it is estimated to be significantly less than the previous year's. Annual revenue is expected to rise 32.8%, which would be the first growth since FY 2018.

Boeing Key Stats
  Estimate for Q2 2021 (FY) Q2 2020 (FY) Q2 2019 (FY)
Adjusted Earnings Per Share ($) -0.79 -4.79 -5.82
Revenue ($B)  16.9 11.8 15.8
Commercial Airplane Deliveries 85  20 90

Source: Visible Alpha

The Key Metric

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. Commercial airplane deliveries have begun to rise amid rising travel demand as the threat from the pandemic has eased in the U.S. However, Boeing continues to face challenges with two of its aircraft: the 737 MAX and the 787 Dreamliner. After gaining regulatory approval to return to service in November 2020, more than 100 737 MAX jets were grounded again in early April due to electrical issues. They were subsequently approved to return to service in May. Earlier this month, Boeing said it would have to slow production of its Dreamliner aircrafts due to a newly discovered defect that could take several weeks to address.

Boeing's commercial airplane deliveries have suffered in recent years because of these kinds of quality issues. In FY 2018, the company delivered 806 commercial aircraft. In FY 2019, the year in which the 737 MAX was first grounded, deliveries fell 52.9%. The next year, deliveries fell a further 58.7% amid the pandemic as well as the continued grounding of the 737 MAX jet. In Q1 FY 2021, Boeing's commercial airplane deliveries grew for the first time since the final quarter of FY 2018, rising 54.0%. Analysts expect deliveries to more than quadruple in Q2 FY 2021 compared to the year-ago quarter, bringing the total to its highest level since the second quarter of FY 2019. For full-year FY 2021, analysts expect commercial airplane deliveries to rise 208.5% to a total of 484, which would be the highest level since FY 2018.