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Why Wall Street Expects a 50% Increase in Boeing’s Q4 EPS

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Analysts’ expectations

Boeing (BA) has an impressive record of reporting better-than-expected quarterly earnings results. The company has beaten Wall Street expectations in eight trailing quarters with an average positive earnings surprise of 9.2%.

Wall Street analysts expect other strong quarterly results for the fourth quarter of 2018. Analysts project a 50% YoY (year-over-year) increase in fourth-quarter EPS to $4.59 on 6.3% higher revenues. Strong revenue growth, along with a lower tax rate and reduced outstanding shares due to the company’s aggressive share buyback program, are likely to drive Boeing’s fourth-quarter earnings.

The fourth-quarter tax rate is expected to come down almost 50% to 16.3% from 29.3% in the year-ago quarter, mainly due to the enactment of the Tax Cuts and Jobs Act. The number of shares outstanding is expected to decline 5% YoY to 574.87 million from 605.10 million.

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Third-quarter performance

On October 24, Boeing reported its third-quarter results. Its top and bottom lines both beat Wall Street estimates and marked significant YoY improvements. The company’s adjusted EPS of $3.58 came in ahead of analysts’ estimates of $3.47 and registered YoY growth of ~32%.

Similarly, quarterly revenues of $25.1 billion beat estimates of $24.0 billion and increased over 3% YoY. Boeing registered revenue growth across all its segments except Commercial Airplane. Plus, the company continues to report growth in its order backlog, which signifies improving future revenues and cash flows.

Buoyed by better-than-expected third-quarter results, Boeing raised its revenues and earnings expectations for 2018 as a whole. The company now projects revenues for the year to come in the range of $98 billion–$100 billion, compared with the previous range of $97 billion–$99 billion. Similarly, its adjusted EPS are expected between $14.90 and $15.10—higher than the earlier guidance range of $14.30–$14.50.

Peers’ expectations

Wall Street’s fourth-quarter EPS projection for Boeing is the highest among peers in the aero-defense space (ITA). Fourth-quarter EPS expectations for Lockheed Martin (LMT), General Dynamics (GD), and Raytheon (RTN) sit at $4.39, $2.98, and $2.88, respectively, which suggests YoY growth of 13.4%, 19.2%, and 41.9%.

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