Aerospace giant The Boeing Company (BA) delivered stellar fourth-quarter 2014 results on booming deliveries. The company reported adjusted fourth-quarter 2014 earnings of $2.31 per share, beating the Zacks Consensus Estimate of $2.07 by 11.6%. The quarterly number rose an impressive 22.9% from $1.88 per share a year ago.
Including pension components related to market fluctuations and other items, Boeing reported a profit of $2.02 a share, up 25.5% from $1.61 per share in the year-ago quarter.
Full year 2014 adjusted earnings came in at $8.60, up 21.6% year over year and ahead of the Street consensus of $8.34 by 3.1%. On a GAAP basis, earnings were $7.38 per share in 2014, up approximately 24% year over year.
The company's revenues rose approximately 3% year over year to $24.5 billion in the reported quarter, comfortably surpassing the Zacks Consensus Estimate of $23.8 billion.
Full year 2014 revenues of $90.8 billion increased 5% from the year-ago level and were above the Zacks Consensus Estimate of $90 billion.
Total Backlog
Backlog at the end of 2014 increased to $502.3 billion from $440.9 billion at the end of 2013. Reported backlog included $152 billion of net orders during the year.
Segment Results
Commercial Airplane Segment: The segment saw a 15% increase in revenues to $16.8 billion on higher delivery volume. However, operating margin contracted 100 basis points (bps) year over year to 9.3%. Margins reflected the dilutive impact of 787 and higher period costs.
In the fourth quarter of 2014, Boeing delivered 195 commercial airplanes, approximately 13.4% higher than the year-ago figure. During the quarter, the Next Generation 737 model proved its popularity once again, delivering 126 airplanes, followed by its 787 model with 35 deliveries.
In the year-earlier period, the company had delivered 110 units of the 737 and 25 units of the 787 model. Boeing delivered 24 units of 777 in fourth-quarter 2014 as against 25 units in the year-ago period.
Boeing delivered its 787 at a rate of nearly 12 per month in the fourth quarter, up from about nine a month in the rest of 2014.
Boeing’s commercial delivery of 723 planes during 2014 accelerated 11.6% year over year thanks to robust 737 and 787 deliveries.
Boeing won net orders for 432 planes in the Dec 2014 quarter with backlog reaching 5,800 airplanes valued at a record $440 billion. Boeing booked 1,432 net orders in 2014 (accounting for cancellations), up 5.7% from 1,355 a year ago, breaking the previous all-time high set in 2007.
Boeing Defense, Space & Security (BDS): Boeing Defense, Space & Security segment however witnessed an approximately 14% year-over-year decrease in its quarterly revenues to $7.8 billion. Its sub-segments – Boeing Military Aircraft (BMA) and Network & Space Systems (N&SS) – recorded top-line declines of 29% and 4%, respectively. Yet, its Global Services & Support (GS&S) unit registered about 2% year-over-year increase.
Quarterly operating margin expanded 130 bps year over year to 12.1%.
Backlog at Defense, Space & Security stood at $62 billion, 36% of which comprised orders from international clients.
Boeing’s deliveries in the defense and space business were 43 in fourth-quarter 2014 compared with 52 in the year-ago period. The breakdown includes 15 Apache helicopters, 8 Chinook helicopters, 8 F/A-18E/F and EA-18G fighter jets, as well as 5 units of P-8, 4 F-15, 2 satellites (government & commercial) and 1 C-40. 2014 defense deliveries increased 7.6% from the 2013 level.
Boeing Capital Corporation (BCC): Boeing Capital Corporation reported quarterly revenues of $153 million compared with $105 million in the year-ago quarter. The segment earnings stood at $26 million as compared to earnings of $9 million a year ago.
At the end of fourth quarter 2014, BCC's portfolio balance was $3.5 billion, flat sequentially.
Financial Condition
Boeing ended 2014 with cash and cash equivalents of $11.7 billion and short-term investments of $1.4 billion. At year-end 2013, the company had $9.1 billion in cash and cash equivalents and $6.2 billion of short-term investments. Long-term debt stood at $8.14 billion in the reported quarter (up from $8.07 billion at 2013 end).
The company generated $5.03 billion of operating cash flow before pension contributions in the fourth quarter 2014, compared with $1.41 billion generated in the same period last year, showing a significant 257% increase.
Guidance
The company expects adjusted or core earnings per share between $8.20 and $8.40 for 2015. GAAP earnings are expected in the range of $8.10–$8.30 per share.
The company expects 2015 revenues in the range of $94.5–$96.5 billion.
Commercial Airplanes' 2015 deliveries are expected between 750 and 755 airplanes while revenues are pegged in a band of $64.5 billion to $65.5 billion with operating margin of 9.5%−10%.
The company expects 2015 defense revenue in the $29.5 billion to $30.5 billion range and operating margin of approximately 9.75%−10%.
Boeing Capital Corporation expects its aircraft finance portfolio to remain stable. The company expects segment revenues to approximate $0.3 billion.
Boeing's 2015 R&D forecast is now approximately $3.5 billion. Capital expenditures for 2015 are expected to be $2.8 billion.
Zacks Rank
Boeing currently holds a Zacks Rank #2 (Buy).
The fact remains that this aerospace and defense leader is flying high on the back of rising demand for its fuel-efficient commercial planes. It once again reported industry record deliveries in 2014, retaining its position as the world’s biggest airplane maker, beating its own projection, driven by strong commercial numbers.
At the Peers
Yesterday, Pentagon’s prime contractor, Lockheed Martin Corp. (LMT), posted fourth-quarter 2014 adjusted quarterly earnings of $3.01 per share, comfortably surpassing the Zacks Consensus Estimate of $2.81 by 7.1%. Earnings in the reported quarter also rose 26.5% from $2.38 per share in the year-ago quarter, led by strong operational performance and higher fighter jet demand.
General Dynamics Corp. (GD) announced fourth-quarter 2014 earnings from continuing operations of $2.19 per share on a diluted basis, surpassing the Zacks Consensus Estimate of $2.10 by 4.3%. Earnings also increased 24.4% from the prior-year figure of $1.76, backed by improved operating margins.
Rockwell Collins Inc. (COL) reported results for first-quarter fiscal 2015 ending Dec 31, 2014. The company’s adjusted first-quarter earnings per share of $1.10 missed the Zacks Consensus Estimate by 1.8%. Earnings, however, improved 14.6% year over year.
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