Boeing Q2 FY2022 Earnings Preview: What Investors Should Watch

Spotlight on Boeing's commercial airplane delivery trends

Essential Highlights

• Experts forecast an adjusted EPS of -$0.11, down from $0.40 in Q2 FY2021.
• Commercial airplane deliveries increased year-over-year but fell short of analyst predictions.
• Revenue is projected to show modest growth as demand for commercial aircraft gradually recovers post-pandemic.

The Boeing Company (BA) has navigated significant hurdles in recent years, many stemming from internal challenges. The manufacturer has grappled with persistent quality control issues and the repercussions of two fatal 737 MAX crashes in 2018 and 2019, which claimed 346 lives. Additionally, the COVID-19 pandemic caused a steep decline in commercial aircraft demand due to a sharp drop in passenger travel. Supply chain disruptions have further complicated production, causing shortages of semiconductors, engines, and other critical components.

As Boeing prepares to release its Q2 FY2022 earnings on July 27, 2022, investors are keen to assess how the company is managing these ongoing difficulties. Analysts anticipate Boeing will report its fifth consecutive quarter of adjusted losses per share, contrasting with positive EPS in the same quarter last year. Nonetheless, modest year-over-year revenue growth is expected.

Investor attention will also focus on Boeing’s commercial airplane deliveries, a vital indicator of market demand for its core products. Earlier this month, Boeing revealed its delivery figures, showing a significant year-over-year increase but still below analyst expectations.

Over the past year, Boeing’s stock has underperformed the broader market. After fluctuating around market levels between July and October 2021, the stock declined sharply in early 2022 and has struggled to regain momentum. Despite some recovery since June, as of July 24, Boeing’s stock trails the S&P 500 with a one-year total return of -28.4%, compared to -9.3% for the index.

Boeing’s Earnings Trajectory

Boeing has experienced a streak of quarterly adjusted losses that predates the pandemic. The company reported annual adjusted losses in fiscal years 2019, 2020, and 2021. Particularly, Q2 and Q4 of FY2019 recorded adjusted losses, with the largest losses occurring in FY2020. However, FY2021 showed some improvement, with Q2 being the only quarter since Q3 FY2019 to post positive adjusted EPS. For Q2 FY2022, analysts predict an adjusted loss of $0.11 per share, marking the smallest quarterly loss in over three years.

Revenue has declined year-over-year in 11 of the past 13 quarters, with the steepest drops in Q2 and Q4 FY2019 and all quarters of 2020. Growth was only seen in Q2 and Q3 FY2021. Analysts now expect a modest 3.9% revenue increase in Q2 FY2022, representing only the third quarter of revenue growth since FY2019 began.

Source: Visible Alpha; Boeing.

Critical Performance Indicator

Boeing’s commercial airplane deliveries remain a crucial metric for investors. While Boeing produces both commercial and military aircraft, commercial demand is more sensitive to economic shifts and thus more volatile. Military aircraft demand is steadier, influenced by government defense policies. The pandemic severely impacted commercial airplane demand, compounded by issues such as the 737 MAX grounding and electrical problems. Deliveries of the 787 Dreamliner have also been paused recently due to production and regulatory challenges.

On July 12, Boeing announced it delivered 121 commercial airplanes in Q2 FY2022. Although this number missed analysts’ forecast of 125, it represents a 58.2% increase from the same quarter last year.

Annual commercial airplane deliveries in recent years have been significantly lower than the 750-800 units delivered annually between 2015 and 2018. Deliveries dropped sharply to 380 in 2019 and declined further in 2020 amidst the 737 MAX crisis and quality concerns. Boeing has since implemented measures to address these issues. Analysts project total commercial airplane deliveries to reach 553 in FY2022, indicating a recovery trend but still below historical levels.

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