• Boeing stock 21% from 52-week highs ahead of Q3 results.
  • Q3 earnings and revenue are expected to decline sequentially.
  • Focus on inflationary pressure and supply chain issues.

Boeing Co (NYSE: BA) is scheduled to deliver its third-quarter results on October 27, 2021, before the market opens. The release is expected to significantly impact the aviation giant sentiments following the COVID-19 triggered slowdown. Additionally, the company is trying to bounce back, having been hit hard by errors and negative news in recent months.

Chart showing BA stock pullback

The stock is flat for the year after giving back all the gains accrued in the first half of the year and consequently pulling back by 21% from its 52-week highs. Therefore, the Q3 report could be pivotal if Boeing stock is to bounce back or edge lower on missing estimates.

The aviation giant’s second-quarter results landed in the better-than-expected territory, beating estimates sizably allowing it to post its first quarterly profit in two years. Gains in defense and services segments have emerged as the biggest catalyst likely to propel the company to solid Q3 results.

Q3 earning expectations

Wall Street expects Boeing to deliver revenue of $16.27 billion in Q3, which would represent a 15% year-over-year increase. However, it will represent a 4.4% decline from second-quarter revenue of $16.998 billion, which was also up 44% year-over-year.

In addition, analysts expect the aviation giant to post a net loss of $0.14 a share, an improvement from a net loss of $1.39 a share delivered the same quarter last year. However, Boeing posted a profit of $0.40 a share in the second quarter.

Image showing Boeing Company Price and EPS Surprise

Boeing is believed to have delivered 85 commercial jets in the third quarter compared to 79 in the second quarter and 77 in the first quarter. However, this growth is not expected to significantly increase revenues, given the drop by a third in high-value wide-body jets. Immediate estimates indicate that deliveries in the defense, space, and security front, which generates significant revenues, tanked to 37 from 43 in the second quarter.

What to look out for when Boeing reports

When Boeing reports focus should be on operational efficiency. In the second quarter, the CEO warned that labor shortages and supply chain issues pose the biggest risk to the company’s operations going forward. It will be interesting to see if the situation has improved.

Additionally focus will also be on the 777X Max programs, which were halted early in the year and continue to hurt Boeing sentiments in the market. The twin-aisle plane is not expected to enter service until late 2023. Customers cutting demand for long-haul lights means reduced demand for airplanes from airlines.

In addition, it will be interesting to see what the aviation giant is doing to address some of the quality issues that the 787 Dreamliner continues to face. While new orders for 737 Max continue to rise, uncertainty as to when it will return to service in China should pose concerns when the company delivers the Q3 report.

The impact of inflationary pressures and shortages due to supply chain bottlenecks should also arouse concerns when Boeing reports. It will be interesting to see whether the company’s cash flow and debt situation has improved.

Boeing stock outlook

Boeing is poised to deliver a Q3 report at a time its stock has consolidated back towards the mean. Technical indicators are neutral and within close proximity, the stock having pulled back by 21% from all-time highs and now flat for the year.

Consequently, a better than expected report signaling revenue and earnings growth should affirm that the company is bouncing back from the COVID-19 triggered slowdown. Consequently, investor sentiments in the stock are likely to increase, causing the stock to rerate higher. In contrast, a disappointing earnings report could trigger renewed sell-off that could see the stock edging lower.