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Market Update

Boeing Raises Guidance on Strong Commercial Deliveries

We're maintaining our fair value estimate following impressive third-quarter results from the aviation giant.

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We're maintaining our fair value estimate following impressive third-quarter results from narrow-moat-rated  Boeing (BA) that included deliveries of 149 airplanes. Aircraft sales grew 28% from the year-ago period to $12.2 billion, faster than the 17% growth in units delivered as the 787 and 747-8 deliveries continue to escalate, bringing the year to date total to 43, slightly more than half the total-year guidance. However, strong deliveries in its military segment were unable to offset a revenue decline of 4% in that division. Combined, sales increased 13% to $20 billion. The overall operating margin contracted to 7.8% from 9.7% as commercial segment margins felt the dilutive impacts of the 787 and 747-8 deliveries but defense margins actually improved from the prior-year quarter. Commercial airplane margins declined to 9.5% from 11.4%, while military segment margins improved to 10.5% from 10.0% in the year-ago period. Earnings per share were $1.35 for the quarter, down 8% from $1.46 last year but well above consensus estimates of $1.12.

The company increased its revenue guidance again to $80.5 billion-$82 billion from $79.5 billion-$81.5 billion, driven by an increase in the military segment. It increased its EPS range to $4.80-$4.95 from $4.40-$4.60. Boeing maintained its commercial delivery expectation of 585-600 aircraft. Gross orders in the quarter included 404 aircraft, and the company is likely to beat 2011 orders, a surprise from our prior estimates, though the 737-MAX accounts for 67% of the total orders and we are unsure which of those were accounted for during its launch commentary in August 2011.

Neal Dihora does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.