Is Boeing Stock a Buy Following Q3 Earnings?
As constraints tightened in Europe amidst climbing new coronavirus cases, U.S. stock market went into a tailspin this week. Of course, the aviation market wasn’t spared, and despite better than anticipated Q3 earnings, neither was Boeing (BA). The stock finished the week down fourteen %, further adding to 2020’s poor performance.
Expectations were low proceeding into the quarter’s print, as well as even with posting a quarter consecutive quarterly loss, Boeing’s third-quarter results came in ahead of Wall Street estimates.
Revenue dropped by 29.4 % year-over-year, yet at $14.1 billion nevertheless beat the Street’s forecast by $140 million. The loss on the bottom line wasn’t as bad as expected, also, with Non-GAAP EPS of -1dolar1 1.39 beating opinion by $0.55.
Read also about:
Boeing found negative (FCF) no cost money flow of $5.08 billion, yet yet, the figure was a development on the previous quarter’s negative $5.6 billion. However, with so much uncertainty surrounding the aviation business, Boeing’s hope of transforming cash flow positive next year appears a tad upbeat.
Being an outcome, RBC analyst Michael Eisen lower his 2021 estimate from FCF development of $3.9 billion to a cash burn of $5.3 billion. The change is mainly driven by additional create of inventory,” that the analyst sees “surpassing ninety dolars BN in danger of early’ 21,” and “a lag time inside the timing of liquidating those business aircraft. Eisen now anticipates negative FCF until 1Q22, when compared to the previous 3Q21.
Boeing announced it strategies on cutting an additional 7,000 tasks. The business entered 2020 with 160,000 employees and has already decreased staff members by 19,000. The A&D giant mentioned it expects to cut the workforce lowered by to 130,000 by the end of 2021.
All of it points to an uphill fight, although Eisen thinks BA is able to turn a running profit in’ twenty one.
We feel profitability is still a wildcard as the company battles to eliminate price tag out of the system to offset an absence of demand recovery and can mostly be determined by professional demand improving, Eisen said. Longer-term, the structural moves to consolidate operations by up to 30 %, buy in efficiencies, and permanently management cost should certainly supply upside as need recovers.
Further catalysts including the re-certification of the 737 MAX, the potential incremental orders of commercial aircraft plus safeguard contract honours, don’t stop Eisen’s rating an Outperform (i.e. Buy). His price target, at $181, implies a 25 % upside from current levels. (In order to view Eisen’s track record, press here)
BA gets mixed reviews from Eisen’s colleagues yet they lean to the bulls’ edge. In accordance with eight Buys, 9 Holds and one Sell, the stock has a moderate Buy consensus rating. Upside of ~24 % could remain in the cards, provided the $179 typical price target. (See Boeing stock evaluation on TipRanks)