Aerospace and defense giant Boeing (BAFree Boeing Stock Report) has released better-than-expected March-period financial results. For the quarter, share earnings came in at $1.22, well ahead of our $0.90 estimate. The top line exceeded $19.3 billion, an increase of 30%, year over year. Healthy levels of aircraft orders and deliveries, along with wider margins at the company's two major divisions (Commercial Aircraft and Defense, Space & Security), fueled the earnings advance. Boeing shares increased nicely in early morning trading in a notably stronger earnings-driven market.

The Commercial Aircraft division fired on all cylinders during the March quarter. It delivered 137 planes in the period, compared with 104 in the year-earlier quarter. Due to the higher level of deliveries and lower R&D expenses, this segment's operating margin expanded 270 basis points, to 9.9%. In addition, during the quarter, Boeing booked 412 net orders, including 301 firm orders for its immensely popular 737 model. Orders also were received for the company's new aircraft, the 787 and 747-8. Its total backlog remains huge, at more than 4,000 planes, valued at $308 billion.

The Defense, Space & Security division also performed well. Revenues exceeded $8.2 billion, an 8% increase, year over year. The operating margin expanded to 9.0%, a 20-basis-point improvement. The highlight of the quarter was the contract win to provide Saudi Arabia with 84 F-15 fighters. Boeing also received sizable orders from the United States Navy and South Korea. All told, this division's backlog now exceeds $72 billion, or more than twice the segment's projected 2012 revenues.

Looking ahead, we continue to like Boeing's near- and long-term prospects. Recently, a slew of reports have signaled that the U.S. economy is improving, albeit slowly and unevenly. As the economy presumably expands, we expect that passenger air travel for business and pleasure will increase. As a result, we believe that a number of airlines will possess the financial flexibility and eagerness to replace their aging fleets with new aircraft. In anticipation, Boeing continues to increase its production schedules for some of its most popular models, including the 737 and the 777. In addition, the 787 is now available, and strong demand persists for this aircraft. We also expect hefty orders from a number of foreign air carriers.

In sum, Boeing's huge aircraft backlog should support full production for many years. Due to the better-than-expected March earnings, we are raising our 2012 share-net estimate by $0.15, to $4.45, which is slightly above management's guidance. Looking further out, we project that Boeing's bottom line will reach $7.25 by the 2015-2017 time frame.

As for the stock, we continue to like Boeing as a core, long-term holding, since it offers worthwhile total return potential to 2015-2017. Indeed, the dividend is well covered, and the good-quality equity (Safety: 2) offers a decent yield. That said, some risks are present. A good percentage of Boeing's revenues are derived from sales to the U.S. military. At this time, due to budgetary concerns, a number of government officials are searching for ways to cut spending, and it is likely that the Defense Budget will continue to be a focus. Boeing designs and manufactures a wide range of military products, ranging from radios to fighter aircraft. At this time, it appears that the Defense Budget will be reduced by one trillion dollars over the next decade. Although it is too early to tell which programs will be reduced or eliminated, it is safe to assume that Boeing will lose some business over this period.

On the bright side, the company has expanded its military sales internationally. In 2011, foreign customers accounted for 50% of Boeing's top line, a trend that will likely continue over the foreseeable future. Thus, we think Boeing is in a good position to offset most of the probable domestic weakness. That said, going forward, we suggest that current and prospective investors monitor Congress and the White House for actions in regard to the Defense Budget.

About The Company: The Boeing Company is a leading manufacturer of commercial jet aircraft. It also produces fighters (F-15, F/A-18), C-17 cargo carrier, V-22 helicopter, E-3 AWACS, E-4 command post, E-6 submarine communicator, ground transportation systems, develops the space station, and does work on the F-22 (ATF). In 2011, foreign sales accounted for 50% of overall revenues, and R&D amounted to 5.7% of sales.

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.