Is Boeing Stock a Buy Following Q3 Earnings?
As restrictions tightened in Europe amidst rising new coronavirus instances, U.S. stock market went into a tailspin this specific week. Obviously, the aviation market wasn’t spared, and in spite of better than expected Q3 earnings, neither was Boeing (BA). The stock finished the week down 14 %, further adding to 2020’s poor performance.
Expectations had been low heading directly into the quarter’s print files, as well as despite posting a fourth consecutive quarterly loss, Boeing’s third quarter results came in ahead of Wall Street estimates.
Revenue dropped by 29.4 % year-over-year, yet usually at $14.1 billion nevertheless beat the Street’s forecast by $140 huge number of. The loss on the bottom line wasn’t as terrible as expected, either, with Non-GAAP EPS of -1dolar1 1.39 beating opinion by $0.55.
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Boeing found bad (FCF) free cash flow of $5.08 billion, nevertheless, yet, the figure was an improvement on the earlier quarter’s negative $5.6 billion. Nonetheless, with so much uncertainty surrounding the aviation industry, Boeing’s optimism of turning money flow positive next year appears a tad optimistic.
Being 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 additional build of inventory,” that the analyst sees “surpassing ninety dolars BN in early’ 21,” and also “a delay inside the timing of liquidating those commercial aircraft. Eisen now anticipates bad FCF until 1Q22, when compared to the prior 3Q21.
Boeing announced it strategies on cutting an additional 7,000 tasks. The business entered 2020 with 160,000 workers 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.
It all points to an uphill struggle, although Eisen believes BA is able to transform an operating profit in’ 21.
We feel profitability remains a wildcard as the business battles to get rid of cost out of the system to offset a lack of demand recovery and often will basically be influenced by professional demand improving, Eisen said. Longer-term, the structural methods to consolidate operations by up to thirty %, buy of efficiencies, and permanently control expense will need to provide upside as demand recovers.
Additional catalysts like the re-certification of the 737 MAX, the possible incremental orders of commercial aircraft plus safety shrink awards, don’t stop Eisen’s rating an Outperform (i.e. Buy). The price target of his, during $181, implies a twenty five % upside out of current levels. (to be able to watch Eisen’s background, press here)
BA gets reviews that are mixed from Eisen’s colleagues yet they lean to the bulls’ side. In accordance with 8 Buys, 9 Holds and one Sell, the stock has a reasonable Buy consensus rating. Upside of ~24 % might be in the cards, provided the $179 average price target. (See Boeing stock analysis on TipRanks)