Is Boeing Stock a Buy Following Q3 Earnings?

Is Boeing Stock a Buy Following Q3 Earnings?

As limitations tightened in Europe amidst soaring new coronavirus instances, U.S. stock market went into a tailspin this specific week. Of course, the aviation industry was not spared, and in spite of better than anticipated Q3 earnings, neither was Boeing (BA). The stock ended the week down 14 %, further contributing to 2020’s poor performance.

Expectations were low proceeding directly into the quarter’s print, and despite posting a fourth consecutive quarterly loss, Boeing’s third-quarter results came in in front of Wall Street estimates.

Revenue decreased by 29.4 % year-over-year, but at $14.1 billion nonetheless beat the Street’s forecast by $140 zillion. The loss on the bottom line wasn’t as bad as expected, either, with Non-GAAP EPS of -1dolar1 1.39 beating opinion by $0.55.

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Boeing found poor (FCF) free money flow of $5.08 billion, yet yet, the figure was an enhancement on the preceding quarter’s poor $5.6 billion. Nevertheless, with so much uncertainty surrounding the aviation business, Boeing’s hope of turning money flow positive next year looks a tad upbeat.

As an end result, 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 build of inventory,” that the analyst sees “surpassing $90 BN in danger of early’ 21,” and also “a lag time in the timing of liquidating those commercial aircraft. Eisen now anticipates bad FCF until 1Q22, compared to the earlier 3Q21.

Boeing announced it strategies on cutting an additional 7,000 tasks. The company entered 2020 with 160,000 employees and has already decreased staff by 19,000. The A&D giant said it expects to cut the workforce lowered by to 130,000 by the conclusion of 2021.

It all points to an uphill struggle, however, Eisen believes BA can transform an operating profit in’ 21.

We feel profitability remains a wildcard as the business battles to get rid of price tag out of the system to offset a lack of demand recovery and often will largely be dependent on business need improving, Eisen said. Longer-term, the structural techniques to consolidate calculations by up to thirty %, buy of efficiencies, and permanently control expense should supply upside as demand recovers.

Further catalysts such as the re-certification of the 737 MAX, the potential incremental orders of business aircraft in addition to safety shrink awards, continue Eisen’s rating an Outperform (i.e. Buy). The price target of his, at $181, implies a 25 % upside from current levels. (In order to watch Eisen’s background, click here)

BA gets mixed reviews from Eisen’s colleagues but they lean to the bulls’ side area. Based on 8 Buys, 9 Holds and 1 Sell, the stock has a reasonable Buy consensus rating. Upside of ~24 % might be in the cards, given the $179 typical price target. (See Boeing stock evaluation on TipRanks)

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