Is Boeing Stock a Buy Following Q3 Earnings?
As restrictions tightened in Europe amidst rising fresh coronavirus instances, U.S. stock market went into a tailspin this particular week. Obviously, the aviation sector wasn’t spared, and despite better than expected Q3 earnings, neither was Boeing (BA). The stock concluded the week down fourteen %, further adding to 2020’s bad performance.
Expectations were low heading into the quarter’s print, as well as even with posting a quarter consecutive quarterly loss, Boeing’s third-quarter results came in in advance of Wall Street estimates.
Revenue dropped by 29.4 % year-over-year, yet usually at $14.1 billion nonetheless overcome the Street’s forecast by $140 huge number of. The loss on the main point here wasn’t as terrible as expected, either, with Non GAAP EPS of -1dolar1 1.39 beating popular opinion by $0.55.
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Boeing reported poor (FCF) free money flow of $5.08 billion, however, still, the figure was an improvement on the earlier quarter’s negative $5.6 billion. However, with so much uncertainty surrounding the aviation industry, Boeing’s optimism of transforming cash flow positive next year appears a tad optimistic.
As an end result, RBC analyst Michael Eisen cut his 2021 estimate from FCF development 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 also “a lag time in the timing of liquidating those commercial aircraft. Eisen currently anticipates negative FCF until 1Q22, when compared to the prior 3Q21.
Boeing announced it strategies 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 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 believe profitability is still a wildcard as the company battles to eliminate price tag out of the device to offset a lack of demand restoration and will mainly be determined by professional demand improving, Eisen said. Longer-term, the structural techniques to consolidate calculations by up to 30 %, buy of efficiencies, and for ever control expense should certainly provide upside as desire recovers.
Additional catalysts such as the re certification of the 737-MAX, the possible incremental orders of commercial aircraft along with safety contract awards, continue 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 background, click here)
BA gets mixed reviews from Eisen’s colleagues yet they lean to the bulls’ side. In accordance with eight Buys, nine Holds and 1 Sell, the stock has a moderate Buy consensus rating. Upside of ~24 % might possibly stay in the cards, provided the $179 usual priced target. (See Boeing stock evaluation on TipRanks)