Is Boeing Stock a Buy Following Q3 Earnings?
As constraints tightened in Europe amidst climbing fresh coronavirus cases, U.S. stock market went right into a tailspin this week. Obviously, the aviation sector wasn’t spared, and in spite of better than expected Q3 earnings, neither was Boeing (BA). The stock finished the week down 14 %, further contributing to 2020’s poor performance.
Expectations were low heading straight into the quarter’s print, and also even with publishing 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 during $14.1 billion nonetheless beat the Street’s forecast by $140 million. The loss on the main point here was not as terrible as expected, also, with Non GAAP EPS of 1dolar1 1.39 beating opinion by $0.55.
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Boeing found bad (FCF) free money flow of $5.08 billion, nonetheless, still, the figure was a development on the prior quarter’s negative $5.6 billion. However, with a great deal of uncertainty surrounding the aviation business, Boeing’s hope of transforming cash flow positive next year looks a tad optimistic.
Being an outcome, RBC analyst Michael Eisen cut his 2021 estimate from FCF generation of $3.9 billion to a cash burn of $5.3 billion. The change is mainly driven by further build of inventory,” which the analyst sees “surpassing $90 BN in danger of early’ 21,” and “a delay inside the timing of liquidating those commercial aircraft. Eisen now anticipates negative FCF until 1Q22, when compared to the previous 3Q21.
Boeing announced it strategies on cutting a more 7,000 tasks. The business entered 2020 with 160,000 workers and has already decreased staff members by 19,000. The A&D giant mentioned it expects to cut the workforce lowered by to 130,000 by the tail end of 2021.
All this points to an uphill fight, however, Eisen thinks BA can transform a running profit in’ twenty one.
We feel profitability is still a wildcard as the company battles to remove price tag out of the system to offset an absence of demand restoration and often will mostly be influenced by commercial need improving, Eisen said. Longer term, the structural techniques to consolidate functions by up to 30 %, buy in efficiencies, and completely control expense should really provide upside as need recovers.
Further catalysts like the re-certification of the 737-MAX, the potential incremental orders of commercial aircraft plus safeguard shrink awards, keep Eisen’s rating an Outperform (i.e. Buy). His price target, at $181, implies a twenty five % upside out of existing levels. (To watch Eisen’s record, press here)
BA gets reviews that are mixed from Eisen’s colleagues however they lean to the bulls’ edge. Based on 8 Buys, 9 Holds and 1 Sell, the stock has a moderate Buy consensus rating. Upside of ~24 % might possibly remain in the cards, provided the $179 average price target. (See Boeing stock evaluation on TipRanks)