Is Boeing Stock a Buy Following Q3 Earnings?
As limitations tightened in Europe amidst soaring new coronavirus cases, U.S. stock market went into a tailspin this particular week. Obviously, the aviation industry was not spared, and in spite of better than anticipated Q3 earnings, neither was Boeing (BA). The stock concluded the week down 14 %, further adding to 2020’s poor performance.
Expectations had been low proceeding directly into the quarter’s print, and despite 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, but during $14.1 billion still beat the Street’s forecast by $140 zillion. The loss on the bottom line was not as bad as expected, also, with Non-GAAP EPS of -1dolar1 1.39 beating opinion by $0.55.
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Boeing found poor (FCF) free cash flow of $5.08 billion, yet yet, the figure was a development on the earlier 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 optimistic.
To be an outcome, RBC analyst Michael Eisen cut his 2021 estimation from FCF generation of $3.9 billion to a money burn up of $5.3 billion. The change is mostly driven by further build of inventory,” which the analyst sees “surpassing $90 BN to come down with early’ 21,” and also “a lag time in the timing of liquidating those commercial aircraft. Eisen currently anticipates negative FCF until 1Q22, when compared to the earlier 3Q21.
Boeing announced it plans on cutting an additional 7,000 jobs. The business entered 2020 with 160,000 staff and has already decreased staff members by 19,000. The A&D giant stated it expects to reduce the workforce down to 130,000 by the conclusion of 2021.
All this points to an uphill struggle, even thought Eisen thinks BA can turn a running profit in’ 21.
We feel profitability is still a wildcard as the company battles to get rid of price out of the device to offset an absence of demand recovery and often will mainly be determined by business need improving, Eisen said. Longer term, the structural moves to consolidate operations by up to thirty %, buy in efficiencies, and permanently management expense ought to provide upside as desire recovers.
Further catalysts such as the re certification of the 737 MAX, the potential incremental orders of commercial aircraft along with safety shrink awards, continue Eisen’s rating an Outperform (i.e. Buy). The price target of his, during $181, implies a 25 % upside out of current levels. (In order to watch Eisen’s track record, press here)
BA gets reviews which are mixed from Eisen’s colleagues however they lean to the bulls’ side. Based on eight Buys, 9 Holds and one Sell, the stock has a reasonable Buy consensus rating. Upside of ~24 % might possibly be in the cards, given the $179 usual priced target. (See Boeing stock evaluation on TipRanks)