Boeing Shares Rise on Earnings Beat and Higher Guidance

Shares of Boeing Company ticked higher as the company released solid earnings for Q3 fiscal 2016 and also delivered a positive outlook for the full year.

Before the bell on Wednesday, Boeing released its third quarter earnings for fiscal 2016 that beat Wall Street expectations. The company also delivered a positive outlook for the full fiscal year.

The Chicago-based aerospace giant reported earnings of $2.81 per share, higher than analysts’ projections of $2.62 per share. Revenue came in at $23.9 billion, lower than the $25.8 billion achieved a year ago, but higher than Wall Street estimates of $23.6 billion.

Boeing also improved on its outlook as it now expects to report 2016 full year earnings in the range of $6.80 to $7.00 per share, up from the initial projections of between $6.10 and $6.30 per share. It also expects revenues to come in the range of $93.5 billion to $95.5 billion, up from the initial projection of between $93.0 billion and $95.0 billion. Wall Street has been modeling for full year earnings of $6.34 per share on revenues of $94.0 billion.

Free Cash Flow

Free cash flow is one of the most important metrics for Boeing investors. In Q3, the free cash flow stood at $2.6 billion, which represented a 13.4% year over year rise. The continued double digit rise in the metric is good news for investors who expect it to continue rising next year and into 2018, as Boeing fills a record backlog of orders.

Tough Market

The global aerospace market has been cooling off but Boeing has shown incredible resilience. In July, Boeing reported its first quarterly loss since 2009, and failed to beat Wall Street expectations for the first time since 2011. But it recovered impressively to deliver an earnings surprise of 33.97% in Q3.

During the quarter, Boeing signed two contracts with the US Air Force worth $2.8 billion to make 19 KC-46 tankers and also mulled over making a new midsize plane or a longer 737, to take advantage of the gap created by retiring the 757 plane. If the plan is initiated and successful, Boeing will continue enhancing its cash flow before it finally makes its first profit on the 787.

Stock Performance

Following the top and bottom line Q3 beats, Boeing shares surged 4.69% to close at $145.54 a share. The stock has now risen 6.52% this week and year to date, it is now up 0.66%. The stock had a tough start to the year but it is now trading near its 12-month highs of $150.59. In fact, the current price level is the highest so far in 2016.

Boeing is showing strength in revenue growth and solid return on equity and with its stock trading at an impressive price to earnings ratio of 26.73 as well as a dividend yield of 3.0%, investors may flock to it as the year comes to an end.