Is Boeing Stock a Buy Following Q3 Earnings?
As restrictions tightened in Europe amidst rising new coronavirus instances, U.S. stock market went right into a tailspin this particular week. Of course, the aviation sector was not spared, and despite better than anticipated Q3 earnings, neither was Boeing (BA). The stock ended the week down 14 %, further contributing to 2020’s bad performance.
Expectations had been low proceeding into the quarter’s print, as well as despite posting a quarter consecutive quarterly loss, Boeing’s third quarter results came in ahead of Wall Street estimates.
Revenue decreased by 29.4 % year-over-year, but at $14.1 billion nevertheless beat the Street’s forecast by $140 zillion. The loss on the bottom line was not 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 a development on the preceding quarter’s negative $5.6 billion. Nevertheless, with so much uncertainty surrounding the aviation industry, Boeing’s optimism of turning money flow positive next year looks a tad upbeat.
To be an end result, RBC analyst Michael Eisen lower his 2021 estimation from FCF development of $3.9 billion to a hard cash burn of $5.3 billion. The change is mostly driven by additional build of inventory,” which the analyst sees “surpassing $90 BN in danger of early’ 21,” and also “a delay in the timing of liquidating those commercial aircraft. Eisen currently anticipates negative FCF until 1Q22, compared to the previous 3Q21.
Boeing announced it plans on cutting an extra 7,000 tasks. The business entered 2020 with 160,000 staff and has already decreased staff by 19,000. The A&D giant stated it expects to lower the workforce lowered by to 130,000 by the end of 2021.
All this points to an uphill fight, even thought Eisen believes BA is able to transform an operating profit in’ twenty one.
We feel profitability is still a wildcard as the business battles to remove price out of the system to offset an absence of demand restoration and can largely be dependent on business demand improving, Eisen said. Longer-term, the structural techniques to consolidate operations by up to 30 %, investment in efficiencies, and permanently management expense really should supply upside as desire recovers.
Further catalysts such as the re certification of the 737-MAX, the possible incremental orders of commercial aircraft along with safeguard shrink awards, don’t stop Eisen’s rating an Outperform (i.e. Buy). The price target of his, at $181, implies a twenty five % upside out of existing levels. (To watch Eisen’s track record, click here)
BA gets reviews that are mixed from Eisen’s colleagues yet they lean to the bulls’ side area. Based on 8 Buys, 9 Holds and one Sell, the stock has a moderate Buy consensus rating. Upside of ~24 % might be in the cards, provided the $179 usual price target. (See Boeing stock analysis on TipRanks)