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The embattled aerospace giant reports first-quarter results Wednesday, giving investors a first look at how much the grounding of the 737 Max jet has hit Boeing
earnings so far — and will affect them later this year. Boeing stock has already fallen 16% from a recent high.XBoeing (BA) commercial aircraft have an outsized impact on the company's financials. The segment was responsible for 60% of 2018 revenue and about 66% of operating earnings. The defense unit accounted for 23% of total revenue and 13% of operating earnings. The global services unit made up the rest.For Q1, analysts expect adjusted Boeing earnings to fall 14.6% to $3.11 per share with revenue down 4.8% to $22.26 billion. Those estimates are down sharply from what analysts saw as recently as last week, when the consensus put EPS at $3.34 on revenue of $23.16 billion.The top-line decline would also be the first in nearly two years, as 737 Max deliveries were halted in the final two weeks of the quarter following the Ethiopian Air crash.Boeing reported earlier this month that it delivered 89 737 Max jets in Q1, down from 173 in Q4 and 132 a year ago. The overall tally of deliveries fell to 149 in Q1 from 238 in Q4 and 184 a year ago. Deliveries will continue to suffer as 737 Max production was temporarily slashed to 42 a month from 52.737 Max Costs To Hit Boeing EarningsIn addition to the drop in deliveries, airlines can claim compensation from Boeing to recover costs related to the 737 Max grounding, delivery delays and leasing replacement aircraft. Estimates of these costs range from $100 million to $170 million per month.On top of that, Boeing may also report expenses related to developing software updates for the Maneuvering Characteristics Augmentation System (MCAS), which is suspected in the Ethiopian Air crash and the Lion Air crash in October.While some companies leave out such one-time expenses, Boeing will likely includes the 737 Max costs in its "core" earnings per share number that Wall Street follows, said Edward Jones analyst Jeff Windau.And he expects Boeing to adjust its guidance because of delays in 737 Max delivery schedules. In January, management predicted 2019 core EPS of $19.90-$20.10 on revenue of $109.5 billion-$111.5 billion. But analysts see EPS of $16.61 on revenue of $102.66 billion.Any compensation for airlines affected by the 737 Max will likely be determined "behind closed doors," said Seaport Global senior analyst Josh Sullivan, but could take the form of Boeing offering better terms on a future order or letting customers get out of an order without paying a penalty.Meanwhile, the defense business could also weigh on Boeing earnings. The company still faces problems with its KC-46 aerial refueling tanker for the Air Force. Deliveries were halted again this month after debris was found in delivered tankers. The KC-46 tanker for the U.S. Air Force is more than two years behind schedule and has cost Boeing $3.5 billion in charges for cost overruns.Boeing Stock Hits TurbulenceShares closed down 0.3% at 374.02 in Tuesday's stock market trading, after the Air Current reported that top 737 Max customer Southwest Airlines had sent representatives to a European carrier to ask about its experience flying the Airbus A220.On Monday, Boeing rejected a weekend New York Times report claiming that a South Carolina plant where the 787 Dreamliner suffers from "shoddy" production and safety standards.U.S. shares of archrival Airbus (EADSY) rose 1.6% to a fresh record high of 34.41.Boeing stock broke out of a cup-with-handle base in late January but fell after the 737 Max grounding and triggered a "round trip" sell signal. Shares have been trading between their 50-day and 200-day moving averages. Boeing stock is not showing any buy signals and is still compromised, according to MarketSmith analysis. Investors should always be leery of buying stocks right before earnings.Analysts are bearish on Boeing stock following the 737 Max grounding. Goldman Sachs cut its price target on Boeing stock. Baird analysts said they expect to see total 2019 deliveries "significantly reduced." Bank of America Merrill Lynch downgraded Boeing stock to neutral, warning that problems with the 737 Max could last months longer than expected.Boeing said Wednesday that it is nearly done with flight testing the redesign of the MCAS automated flight-control system. Next, it needs to perform the certification flight before Boeing can submit the final report to the Federal Aviation Administration.Earlier this month, a draft report from the FAA's Flight Standardization Board called the MCAS software update "operationally suitable."Honeywell (HON), a 737 Max supplier, said Thursday that it sees the plane flying again in the second half of 2019 and sees production rebounding.And United Airlines (UAL), which has canceled its 737 Max flights through early July, said Wednesday that it expects the plane to return to service this summer, with deliveries resuming before year's end. Southwest Airlines (LUV) and American Airlines (AAL) canceled their 737 Max flights through August.After Boeing earnings come out, another peek into the 737 Max fallout will come April 29, when management will meet with shareholders.Follow Gillian Rich on Twitter @IBD_GRich for aviation news and more. YOU MAY ALSO LIKE: Is Boeing Stock A Buy Right Now? This Is What You Need To KnowGet Free IBD Newsletters: Market Prep | Tech Report | How To InvestIBD's New Investing Podcast: Exclusive Trading Tips And Market InsightsCatch The Next Big Winning Stock With MarketSmithThe post Boeing Earnings Are Looking A Lot Uglier As Analysts Slash Estimates appeared first on Investor's Business Daily. Weiter zum vollständigen Artikel bei "Investors Business Daily"
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