Why Did Boeing’s Stock Dip after Its 4Q15 Earnings Announcement?



4Q15 earnings

The Boeing Company (BA) reported its 4Q15 and 2015 results in the early hours of January 27, 2016. The company reported fourth quarter revenue of $23.57 billion, which was in line with analysts’ estimates of $23.58 billion. Its earnings per share of $1.51 comfortably beat analysts’ estimate of $1.28, helped by record deliveries and a strong performance in both of its businesses.

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Market punishes weaker outlook

However, Boeing (BA) gave a weaker-than-expected outlook for the upcoming year, citing weakness in the cargo market as one of the major reasons. The company declared that it would deliver fewer planes in 2016. This is the first time since 2010 that BA has announced a cut in deliveries. The market reaction was immediate and the stock fell by ~9% from $128 to $116 at the end of the day.

Investors should, however, remember that Boeing is known to be initially conservative with its guidance and usually changes its guidance throughout the year.

Boeing stock falls in 2016 YTD

Boeing’s (BA) stock gained about 9.8% throughout 2015. However, the stock reversed its direction and has fallen by about 18.3% since the start of 2016. This fall has been primarily driven by weakness in demand, especially in cargo planes, as well as the growing concerns about a global economic slowdown amid falling oil prices.

Although not strictly comparable, BA’s defense peers Lockheed Martin (LMT), United Technologies (UTX), and General Dynamics (GD) also declined by 5%, 10%, and 6%, respectively, year-to-date.

BA forms 8% holding of the iShares US Aerospace & Defense ETF (ITA).


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