The Zacks Analyst Blog Highlights: The Boeing, Lockheed Martin, Abbott Labs, Bristol-Myers Squibb and Biogen

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Jan 26, 2012, 09:30 ET

CHICAGO, Jan. 26, 2012 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include The Boeing Company (NYSE: BA), Lockheed Martin Corporation (NYSE: LMT), Abbott Labs (NYSE: ABT), Bristol-Myers Squibb (NYSE: BMY) and Biogen (Nasdaq: BIIB).

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Here are highlights from Wednesday's Analyst Blog:

Boeing Tops on Higher Deliveries

In the fourth quarter of 2011, The Boeing Company (NYSE: BA) soaring on higher deliveries of commercial airplanes posted strong numbers. In the reported quarter, the company posted operating EPS (excluding special items) of $1.32, beating both the Zacks Consensus Estimate of $1.02 and year-ago EPS of $1.06. The company's strong numbers came from higher commercial planes deliveries which more than offset a tepid quarter for defense.

On a reported basis, Boeing reported quarterly EPS of $1.84 per share versus $1.56 in the year-ago quarter. The 52 cents difference between reported and operating earnings, during the reported quarter, was owing to the effects of a favorable tax settlement.

Fiscal 2011 operating EPS (excluding special items) came in at $4.81, above the Zacks Consensus Estimate of $3.81 and fiscal 2010 earnings of $4.16. On a reported basis, earnings came in at $5.34 in fiscal 2011 versus $4.45 in fiscal 2010.

Operating Statistics

On the revenue front, higher airplane deliveries pulled up the quarterly revenue year-over-year by 18% to $19.6 billion, above the Zacks Consensus Estimate of $19.3 billion. Fiscal 2011 revenue rose 7% to $68.7 billion, moderately above the Zacks Consensus Estimate of $68.5 billion.

Segment Results

Commercial Airplane segment

Boeing's Commercial Airplane segment in the reported quarter saw a 10% rise in deliveries to 128 units. As a result, Commercial Airplanes revenue increased by 31% to $10.7 billion on higher delivery volume and mix. In the reported quarter the company delivered 9 747 series and 2 787 series airplanes versus zero deliveries in the year-ago period. The company also delivered a higher number of 767 and 777 series airplanes (6 & 20) versus the year-ago period (3 & 18). The upsurge was partially offset by a lower number of 737 deliveries (91 versus 95) year over year.

Operating margin rose 150 basis points to 9.2%, reflecting lower Research & Development expenditure. This was partially offset by the dilutive impact of initial 787 and 747-8 deliveries and higher period costs.

Commercial Airplanes booked 379 net orders during the reported quarter. Backlog at fiscal 2011-end remains strong with more than 3,700 airplanes valued at a record $296 billion.

Boeing Defense, Space & Security

Boeing Defense, Space & Security segment witnessed a 4% rise in its quarterly revenue to $8.5 billion. Of these sub-segments Boeing Military Aircraft (BMA) and Global Services & Support (GS&S) witnessed a top line climb of 9% and 21%, respectively. Only the sub-segment, Network & Space Systems (N&SS) recorded a 19% fall in revenues.

Quarterly operating margin rose by 20 basis points to 10.2%. This was due to strong execution across various BMA programs. However, this was partially offset by lower margins at the N&SS and GS&S units. In the N&SS sub-segment, margin fell owing to higher R&D. Similarly GS&S margins were affected by the downcast in current defense contracting environment.

Backlog at Defense, Space & Security was $60.0 billion.

Boeing Capital Corporation (BCC)

Boeing Capital Corporation reported quarterly revenues of $116 million compared with $145 million in the year-ago quarter. The segment digested a loss of $8 million compared to earnings of $6 million in the year-ago period. At fiscal 2011-end, BCC's portfolio balance declined to $4.3 billion, flat versus the beginning of the reported quarter.

Financial Condition

Boeing ended fiscal 2011 with cash and cash equivalents of $10.0 billion and short-term investments of $1.2 billion. At fiscal-end 2010, the company had $5.4 billion in cash and cash equivalents and $5.2 billion of short-term investments. The company generated more than $4.0 billion of cash from operating activities in fiscal 2011, compared with approximately $3.0 billion generated in fiscal 2010. Long-term debt decreased to $10.0 billion at the end of the reported fiscal from $11.5 billion at the end of fiscal 2010.

Outlook

Boeing has a unique position as the largest aircraft manufacturer in the world in terms of revenues, orders and deliveries, and is one of the largest aerospace and defense contractors in the world. Besides, its revenues are spread across more than 90 countries around the globe.

Boeing expects its fiscal 2012 GAAP earnings to be in the range of $4.05–$4.25 per share, and adjusted earnings of $5.06–5.26 per share. Revenue for 2012 is expected to be between $78 billion and $80 billion. Commercial Airplanes' 2012 deliveries are expected to be between 585 and 600 airplanes and are already sold out. This includes an expected 70 to 85 787 and 747-8 deliveries. Commercial Airplanes' 2012 revenue is expected to be between $47.5 billion and $49.5 billion with operating margins between 8.5% and 9%.

In the defense space, the company also secured big contracts like the sale of 84 new F-15SA aircraft and upgrades to an additional 70 F-15Ss to Saudi Arabia; P-8A low rate initial production lot II production award from the U.S. Navy; development and sustainment contract for Ground-based Midcourse Defense from the U.S. Missile Defense Agency; and the C-17 Globemaster III Integrated Sustainment Program from the U.S. Air Force. However, the threat of defense cutbacks will loom over the company going forward. Overall, the company expects defense revenue for 2012 to be between $30.0 billion and $30.5 billion with operating margin greater than 9%.

Boeing Capital Corporation expects that its aircraft finance portfolio will continue to decline in 2012, as new aircraft financing of less than $0.5 billion is expected to be lower than the normal portfolio runoff through customer payments and depreciation. BCC's debt-to-equity ratio is expected to return to 5.0-to-1 in the first quarter of 2012 due to the repayment of maturing debt.

Boeing's 2012 R&D forecast is between $3.3 billion and $3.5 billion. Capital expenditures for 2012 are expected to be approximately $2.0 billion.

Boeing currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. Considering the fundamentals, we are maintaining our Neutral recommendation on the stock. This is in sync with other aerospace and defense behemoths. A clearer picture will emerge tomorrow when the big daddy of defense Lockheed Martin Corporation (NYSE: LMT) comes out with 2011 earnings.

Abbott Beats, Guides In-Line

Abbott Labs (NYSE: ABT) reported fourth quarter earnings of $1.45 per share, a penny above the Zacks Consensus Estimate and at the higher end of the guidance range provided by the company. Fourth quarter earnings increased 11.5% from the year-earlier period. Including one-time items, fourth quarter earnings increased 10.9% to $1.02 per share.

Fourth quarter revenues increased 4.1% to $10.4 billion, just shy of the Zacks Consensus Estimate of $10.6 billion.

Full year earnings came in at $4.66 per share, a penny above the Zacks Consensus Estimate and 11.8% above the year-ago earnings. Full year earnings came in at the higher end of the guidance range of $4.64 - $4.66 per share. 2011 revenues increased 10.5% to $38.9 billion, just shy of the Zacks Consensus Estimate of $39 billion.

In-Line Outlook for 2012

Along with releasing fourth quarter results, Abbott Labs provided guidance for 2012. The company expects 2012 earnings in the range of $4.95 to $5.05 per share. Guidance was in-line with expectations with the Zacks Consensus Estimate, currently standing at $5.04 per share. The company intends to resume share buybacks in 2012.

Abbott Labs provided an update on its intention to split into two separate publicly traded companies: the company said that it expects to complete the separation by year end. While one company will deal in diversified medical products, the other will focus on research-based pharmaceuticals

Pipeline Update

Abbott Labs also provided an update on its pipeline. The company currently has 20 candidates in phase II/phase III development. The acquisition of Facet Biotech has helped strengthen Abbott Labs' early- and mid-stage oncology portfolio. The company moved elotuzumab, which is being developed with Bristol-Myers Squibb (NYSE: BMY), into phase III studies for multiple myeloma.

Abbott Labs is also working on strengthening its neuroscience portfolio and has several candidates in different stages of development for the treatment of diseases like schizophrenia, pain, Parkinson's Alzheimer's and multiple sclerosis. Abbott Labs, along with partner Biogen (Nasdaq: BIIB), moved daclizumab into a phase III study for the treatment of relapsing-remitting multiple sclerosis (RRMS). Abbott Labs is also working on an intestinal gel for advanced Parkinson's disease – the company expects to file for US approval in 2012.

Another promising pipeline candidate is bardoxolone, which is in phase III studies for chronic kidney disease.

Neutral on Abbott Labs

We currently have a Neutral recommendation on Abbott Labs, which carries a Zacks #3 Rank (short-term Hold rating). We believe Abbott Labs' strong business segments, contributions from recent acquisitions and impressive late-stage pipeline will help fortify long-term earnings growth. Humira should continue to be a strong growth driver in the years to come.

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