Key points to remember
- Adjusted EPS was -$15.25 versus analysts’ expectation of -$1.70.
- Revenue exceeded analysts’ expectations.
- Commercial aircraft deliveries were down year-on-year.
- The 737 MAX has begun to receive regulatory approval to resume operations.
What happened
Boeing reported a significantly larger adjusted loss per share than analysts expected in the fourth quarter of fiscal 2020. Its adjusted loss per share was more than 6.5 times greater than the same three-month period a year ago. a year. Revenue was also down year-on-year, but beat analysts’ forecasts. Commercial aircraft deliveries, which were reported earlier this month, were down from the year-ago quarter.
Boeing noted that since FAA approval to return the 737 MAX to operations, the company has delivered more than 40 of the previously grounded planes.
(Below is the original Earnings Snapshot from Investopedia, published January 25, 2021.)
What to look for
Boeing Co. (BA), one of the world’s largest aircraft manufacturers, is emerging from a difficult year in which it has been grappling with two major crises: falling demand for new aircraft due to falling pandemic-induced air travel and the continued grounding of the company’s 737 MAX aircraft, which has been involved in two fatal crashes. But things may be starting to look up for Boeing. The rollout of new COVID-19 vaccines could open the door to more air travel, and the ban on the 737 MAX was recently lifted by the US government.
Although it may be some time before air travel fully recovers, investors will be looking for signs that Boeing has been able to limit the damage to its financial results when the company releases its results on January 27, 2021 for the fourth quarter of fiscal 2020.Analysts expect another adjusted loss per share as revenue continues to decline, albeit at a much slower pace than in recent quarters.
Another key metric of interest to investors is the number of commercial aircraft Boeing delivered during the quarter. Boeing’s fourth-quarter deliveries report, released earlier this month, showed a mixed picture. Total commercial aircraft deliveries decreased year-over-year (YEAR) base. But a promising sign is that those deliveries were more than double the number made in the third quarter of fiscal 2020.
Shares of the aircraft manufacturer have lagged the market over the past year. The stock got off to a good start early last year, but the pandemic-induced stock market crash between late February and late March 2020 sent the stock plummeting. He hasn’t fully recovered yet. Boeing shares have provided a total return of -33.4% over the past 12 months, well below the S&P 500 total return of 16.0%.
Source: Trading View.
The stock initially fell after Boeing announced financial results for the third quarter of fiscal 2020, which were better than expected.The company posted an adjusted loss per share of $1.39, marking the fourth consecutive quarter of losses. Revenue fell 29.2%, the seventh consecutive quarter of year-on-year decline. In the third quarter, however, revenue saw a significant increase compared to the second quarter of fiscal 2020. Boeing noted that its financial results continued to be heavily impacted by the pandemic and the grounding of the 737 MAX.
The second quarter of fiscal 2020 was even tougher for Boeing. The company posted an adjusted loss per share of $4.79. Revenue fell 25.0% to $11.8 billion, the lowest revenue level for any quarter in at least three years.The stock fell on the news and despite a few brief surges, it fell over the next three months.
Analysts expect further loss and lower revenue in the fourth quarter of fiscal 2020. Adjusted loss per share is expected to be $1.70 as revenue falls 15.5%. For fiscal 2020, adjusted loss per share is expected to be $9.71, nearly three times the loss recorded in fiscal 2019. Annual revenue is expected to decline 24.3% for the second consecutive year.
| Boeing Key Metrics | |||
|---|---|---|---|
| Q4 2020 (fiscal year) | Q4 2019 (fiscal year) | Q4 2018 (fiscal year) | |
| Adjusted earnings per share ($) | -1.70 (estimate) | -2.33 | 5.48 |
| Revenue ($B) | 15.1 (estimate) | 17.9 | 28.3 |
| Commercial aircraft deliveries | 59 (actual) | 79 | 238 |
Source: visible alpha; Boeing.
As mentioned above, Boeing’s commercial aircraft deliveries are also a key metric watched by investors. Boeing manufactures commercial and military aircraft. The demand for the first type is much more sensitive to economic conditions while the demand for the second depends on the political decisions of the government regarding its military program. Pandemic-related global travel restrictions have caused a major contraction in air travel, reducing demand for new commercial aircraft. While travel restrictions have eased since the start of the pandemic and the successful rollout of vaccinations could lead to more restrictions being lifted this year, the economic fallout from the pandemic could hamper any marked rebound in air travel.
The pandemic has compounded Boeing’s delivery problems, which began after the 737 MAX plane crashes led to its grounding by U.S. and global regulators. Before the grounding, Boeing delivered a total of 238 commercial aircraft in the last quarter of 2018. This number fell to 149 in the first quarter of 2019. In the fourth quarter of fiscal 2019, before the pandemic, the total number of deliveries commercial aircraft fell 66.8% year-on-year. . Commercial aircraft deliveries in the second quarter of fiscal 2020 fell 77.8% year-on-year to a total of 20, the lowest number of deliveries in at least 15 quarters. Fiscal 2020 fourth-quarter shipments rose to 59, but are still down year-over-year. The FAA has lifted its ban on the 737 MAX and Europe is expected to lift its ban before the end of the month, but now Boeing is facing manufacturing issues related to its 787 Dreamliner that have delayed deliveries.Combined with the negative impact of the pandemic, these headwinds indicate that Boeing deliveries may not fully recover any time soon.
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