Is Boeing Stock a Buy Following Q3 Earnings?
As limitations tightened in Europe amidst soaring fresh coronavirus instances, U.S. stock market went into a tailspin this specific week. Of course, the aviation sector was not spared, and despite better than expected Q3 earnings, neither was Boeing (BA). The stock finished the week down fourteen %, further adding to 2020’s bad performance.
Expectations had been low proceeding straight into the quarter’s print documents, and despite posting a quarter 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 usually at $14.1 billion nonetheless overcome the Street’s forecast by $140 million. The loss on the bottom line wasn’t as bad as expected, either, with Non GAAP EPS of -1dolar1 1.39 beating consensus by $0.55.
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Boeing found negative (FCF) free cash flow of $5.08 billion, yet even now, the figure was an improvement on the preceding quarter’s poor $5.6 billion. But, with so much uncertainty surrounding the aviation industry, Boeing’s optimism of turning money flow positive next year appears a tad upbeat.
Being a result, RBC analyst Michael Eisen cut his 2021 estimation 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,” which the analyst sees “surpassing $90 BN in early’ 21,” and “a delay in the timing of liquidating those commercial aircraft. Eisen currently anticipates bad FCF until 1Q22, compared to the previous 3Q21.
Boeing announced it strategies on cutting an extra 7,000 tasks. The business entered 2020 with 160,000 employees and has already reduced staff by 19,000. The A&D giant mentioned it expects to lower the workforce lowered by to 130,000 by the conclusion of 2021.
It all points to an uphill struggle, nevertheless, Eisen thinks BA is able to turn a working profit in’ twenty one.
We believe profitability is still a wildcard as the company battles to eliminate price out of the system to offset an absence of demand recovery and will mostly be dependent on business demand improving, Eisen said. Longer-term, the structural moves to consolidate operations by up to 30 %, investment of efficiencies, and for ever management cost will need to supply upside as desire recovers.
Additional catalysts like the re-certification of the 737 MAX, the possible incremental orders of business aircraft plus defense shrink honours, continue Eisen’s rating an Outperform (i.e. Buy). His price target, at $181, implies a twenty five % upside out of existing levels. (In order to watch Eisen’s background, press here)
BA gets reviews that are mixed from Eisen’s colleagues but they lean to the bulls’ edge. In accordance with eight Buys, nine Holds and one Sell, the stock has a reasonable Buy consensus rating. Upside of ~24 % could stay in the cards, provided the $179 average priced target. (See Boeing stock analysis on TipRanks)