Aerospace & Defense

Boeing shares surge after the company reports blowout results and raises 2018 forecast

Key Points
  • The aerospace giant reports third-quarter adjusted earnings of $3.58 a share, topping Wall Street expectations by 11 cents.
  • Boeing raises its full year 2018 earnings forecast.
  • CEO Dennis Muilenberg notes that the company landed billions in military contracts this summer.
Boeing may top $100 billion in revenue for the first time

Shares of Dow component Boeing rose Wednesday after the company reported strong third-quarter earnings on the back of a robust defense business and more efficient commercial aircraft production. The company also raised its 2018 earnings forecast, in what looks to be a record year for revenue.

The aerospace giant reported adjusted earnings of $3.58 a share, topping expectations of 11 cents by analysts surveyed by Refinitiv. Third-quarter revenue came in a $25.15 billion, which was over $1 billion more than analysts forecast.

The stock ended the day up 1.3 percent at $354.65 a share, after rising as high as $364.60 a share in early trading, as Boeing followed the rest of the Dow Jones Industrial Average lower.

Boeing raised its full year 2018 earnings forecast to a range of $14.90 to $15.10, up from its previous guidance of $14.30 to $14.50. Boeing may see its full year revenue top $100 billion for the first time, as well.

CEO Dennis Muilenberg noted that Boeing landed billions in military contracts this summer, which he termed "important new defense business." The Navy selected Boeing to develop the MQ-25 unmanned aircraft system and the Air Force awarded Boeing $9.2 billion to build the T-X trainer aircraft and $2.4 billion for the MH-139.

The delayed KC-46 tanker aircraft cost Boeing $176 million in additional charges in the third quarter — $112 million to its commercial airplane business and $64 million to its defense business. The KC-46 program has now cost Boeing $3.6 billion in total charges for the Air Force contract.

Boeing is very in tune with the administration and customer base, says Jefferies analyst

"What really surprised us to the upside was aerospace margins in the 13 percent range and they're raising their guidance for that," Jefferies analyst Sheila Kahyaoglu said on CNBC's "Squawk Box."

For its its airplane-making business, Boeing delivered 190 commercial aircraft in the third quarter, bringing its total deliveries for the year to 568. The business had fallen short of delivery estimates in the second quarter, but Boeing stuck to guidance in the latest report, saying the company would deliver at least 810 airplanes this year. Boeing continues to ramp up production, especially on its core 737 aircraft, and aims to get to a key production rate of 52 aircraft each month.

"They maintained their delivery guidance, which means they could get to that 52 a month by the end of the year," Kahyaoglu added.

President Donald Trump's trade war with China is a key theme Kahyaoglu is watching. She said China is "a big customer of Boeing," representing about a third of the company's orders for Boeing-737 aircraft. While it's important for shareholders to pay attention to the company's business in China, the analyst did not raise concern about Boeing possibly getting caught in the middle of the trade war.

"I think Boeing's very in tune with the administration but also with its customers," Kahyaoglu said.

Boeing shares slipped 2.3 percent over the last three months but the stock is still up 18.7 percent for the year as of Tuesday's close of $350.05 a share.