Could Boeing Put an End to Its Revenue Decline?



Revenue slow down

Boeing’s (BA) revenue fell 7.3% YoY (year-over-year) to ~$20.0 billion in 1Q17, lower than analysts’ estimate of a 5.2% fall. The falling trend is expected to continue for the next two quarters. In 2Q17, revenue is expected to fall 6.7% to $23.1 billion, and in 3Q17, by 1.0% to $23.7 billion. The five-quarter declining streak is expected to end in the fourth quarter, when revenue is expected to rise 3.8% to $24.2 billion.

In fiscal 2017, revenue is expected to fall 2.8% to ~$92.0 billion. In 2018, revenue is expected to rise 1.9% to ~$93.7 billion.

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Impact from deliveries

As we discussed in the previous article, Boeing (BA) deliveries slowed down in the first half of 2017. Slower deliveries mean lower revenue. The slowdown was expected, as Boeing has been cutting production of its 777s and 747s since 2016.


Boeing has maintained its fiscal 2017 revenue guidance at $90.5 billion–$92.5 billion, which is lower than 2016’s revenue of $94.6 billion. Analyst estimates are in line with Boeing’s guidance. Commercial airplane deliveries are expected to rise to 760–765 aircraft, compared with 748 aircraft delivered in 2016.

One good thing going for Boeing in 2017 has been the higher number of wide body orders. It has managed to secure 119 wide body aircraft orders so far in 2017, comprising orders for 75, 33, and 15 787s, 777s, and 767s, respectively. It is important for Boeing to secure wide body orders, though the huge order backlog for its narrow body aircraft (737 and 737 Max) will keep the production lines busy for some time.

Boeing forms the third-largest holding of the Dow Jones Industrial Average ETF (DIA), making up ~6% of its portfolio. DIA also has a 3.9% exposure to Boeing rival United Technologies (UTX). However, it has no exposure to Lockheed Martin (LMT), General Dynamics (GD), or Northrop Grumman (NOC).


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