Is Boeing Stock a Buy Following Q3 Earnings?
As constraints tightened in Europe amidst soaring new coronavirus cases, U.S. stock market went into a tailspin this particular week. Obviously, the aviation sector was not spared, and in spite of better than expected Q3 earnings, neither was Boeing (BA). The stock finished the week down 14 %, further contributing to 2020’s bad performance.
Expectations had been low proceeding directly into the quarter’s print, as well as despite publishing a fourth consecutive quarterly loss, Boeing’s third quarter results came in in front of Wall Street estimates.
Revenue dropped by 29.4 % year-over-year, but usually at $14.1 billion nevertheless beat the Street’s forecast by $140 million. The loss on the main point here was not as bad as expected, either, with Non GAAP EPS of 1dolar1 1.39 beating opinion by $0.55.
Read also about:
Boeing found bad (FCF) free money flow of $5.08 billion, yet still, the figure was a development on the prior quarter’s negative $5.6 billion. However, with so much uncertainty surrounding the aviation industry, Boeing’s hope of transforming money flow positive next year looks a tad optimistic.
As an outcome, RBC analyst Michael Eisen lower his 2021 estimate from FCF generation of $3.9 billion to a hard cash burn of $5.3 billion. The change is mainly driven by further create of inventory,” that the analyst sees “surpassing ninety dolars BN to come down with early’ 21,” as well as “a lag time in the timing of liquidating those business aircraft. Eisen now anticipates bad FCF until 1Q22, when compared to the previous 3Q21.
Boeing announced it strategies on cutting an additional 7,000 tasks. The company entered 2020 with 160,000 staff and has already reduced staff members by 19,000. The A&D giant mentioned it expects to lower the workforce lowered by to 130,000 by the end of 2021.
It all points to an uphill struggle, nonetheless, Eisen thinks BA is able to turn a working profit in’ twenty one.
We feel profitability remains a wildcard as the company battles to eliminate price tag out of the device to offset an absence of demand recovery and will largely be determined by commercial need improving, Eisen said. Longer term, the structural methods to consolidate calculations by up to thirty %, investment of efficiencies, and for ever management cost should provide upside as demand recovers.
Further catalysts like the re-certification of the 737-MAX, the possible incremental orders of commercial aircraft in addition to defense contract honours, don’t stop Eisen’s rating an Outperform (i.e. Buy). His price target, during $181, implies a 25 % upside from current levels. (To watch Eisen’s record, press here)
BA gets reviews which are mixed from Eisen’s colleagues but they lean to the bulls’ side. Based on 8 Buys, 9 Holds and 1 Sell, the stock has a moderate Buy consensus rating. Upside of ~24 % could remain in the cards, given the $179 usual price target. (See Boeing stock analysis on TipRanks)