Boeing (BA) has been one of the most popular stocks among Zacks.com visitors recently, so it may be a good idea to take a look at some factors that could impact the stock’s near-term performance.
Over the past month, shares of this aircraft manufacturer have risen +2.4% versus a +3.2% gain for the Zacks S&P 500 Composite Index. The Zacks Aerospace – Defense industry, which Boeing belongs to, has fallen 1.9% during that period. The big question here is, what is the direction of this stock going forward?
While media announcements or rumors of significant changes in a company’s business outlook will usually make the stock “trend” and cause immediate price movements, there are always some fundamental facts that ultimately drive the buy-and-hold decision.
Earnings forecast revision
At Zacks, we evaluate changes in a company’s future earnings estimates above all else because we believe the present value of future earnings streams determines the fair value of a stock.
Our analysis is essentially based on how sell-side analysts covering the stock are revising their earnings forecasts in light of the latest business trends. When a company’s earnings forecast goes up, the fair value of its stock also goes up. And if a stock’s fair value is higher than its current market price, investors are more inclined to buy the stock, resulting in an increase in its share price. For this reason, empirical research shows a strong correlation between trends in earnings forecast revisions and short-term stock price movements.
For the current quarter, Boeing is projected to post a loss of $0.90 per share, which would represent a -9.8% change from the year-ago period. The Zacks Consensus Estimate has changed -30.1% within the past 30 days.
The consensus revenue estimate for the current fiscal year is -$1.57, indicating a change of +73% year-over-year. This estimate has changed -160.2% over the past 30 days.
Looking at the next fiscal year, the consensus earnings estimate is $4.54, which represents a +388.8% change from what Boeing was expected to report a year ago. Over the past month, estimates have changed -13.8%.
The Zacks Rank, our proprietary stock rating tool with a strong outside-audited track record, effectively harnesses the power of earnings estimate revisions to provide a more certainty view into near-term stock price direction. The magnitude of the recent change in consensus estimates, along with three other factors related to earnings estimates, have earned Boeing a Zacks Rank #3 (Hold).
The chart below shows the evolution of the company’s consensus EPS estimates over the next 12 months.
12 Month EPS
Projected Revenue Growth
A company’s earnings growth is arguably the best indicator of a company’s financial health, but nothing happens if the company can’t grow earnings. It’s nearly impossible for a company to grow its earnings without growing its revenue over the long term. Therefore, knowing a company’s earnings growth potential is very important.
For Boeing, the consensus revenue estimate for the current quarter is $18.44 billion, indicating a -6.6% change year-over-year. For the current and next fiscal years, estimates of $78.48 billion and $93.99 billion indicate changes of +0.9% and +19.8%, respectively.
Last reported results and surprise history
Boeing reported revenue of $16.57 billion for the most recent quarter, down 7.5% from the same period last year. EPS was -$1.13 for the quarter, compared to -$1.27 in the same period last year.
Compared to the Zacks Consensus Estimate of $17.69 billion, reported revenues represented a surprise of -6.34%. EPS surprise was +20.98%.
Over the last four quarters, Boeing has topped consensus EPS estimates three times, and revenue has surpassed consensus estimates two times during that period.
evaluation
No investment decision can be efficient without taking into account stock valuation. To predict the future price movement of a stock, it is important to determine whether the current price properly reflects the intrinsic value of the underlying business and the company’s growth prospects.
Comparing the current value of a company’s valuation multiples such as Price to Earnings (P/E), Price to Sales (P/S), Price to Cash Flow (P/CF) with its historical values ​​helps in identifying whether the stock is fairly valued, overvalued or undervalued. Also, comparing a company with its peers based on these parameters gives a good idea of ​​how reasonably priced its stock is.
The Zacks Value Style Score, a part of the Zacks Style Scores system, evaluates both traditional and non-traditional metrics, categorizes stocks into five groupings from A to F (A is better than B, B is better than C, etc.) to help identify whether stocks are overvalued, fairly valued or temporarily undervalued.
In this regard, Boeing has been rated D, indicating that it is trading at a premium to its industry peers. Click here to see the values ​​of the valuation metrics that drove this rating.
Conclusion
The facts discussed here, and many other information on Zacks.com, may help you decide whether the market buzz surrounding Boeing is worth following, however, its Zacks Rank #3 suggests that Boeing is likely to perform in line with the broader market in the near term.
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