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 market was not spared, and in spite of better than anticipated Q3 earnings, neither was Boeing (BA). The stock ended the week down fourteen %, further contributing to 2020’s poor performance.
Expectations had been low heading directly into the quarter’s print documents, and also despite publishing a fourth consecutive quarterly loss, Boeing’s third quarter results came in in advance of Wall Street estimates.
Revenue decreased by 29.4 % year-over-year, but during $14.1 billion nevertheless beat the Street’s forecast by $140 zillion. The loss on the main point here wasn’t as bad as expected, also, with Non GAAP EPS of -1dolar1 1.39 beating opinion by $0.55.
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Boeing found negative (FCF) no cost money flow of $5.08 billion, nevertheless, even now, the figure was an enhancement on the earlier quarter’s negative $5.6 billion. Nevertheless, with so much uncertainty surrounding the aviation industry, Boeing’s optimism of transforming money flow positive next year looks a tad optimistic.
Being an end result, RBC analyst Michael Eisen cut his 2021 estimate from FCF generation of $3.9 billion to a money burn of $5.3 billion. The change is mostly driven by additional create of inventory,” which the analyst sees “surpassing ninety dolars BN to come down with early’ 21,” and also “a delay within the timing of liquidating those commercial aircraft. Eisen currently anticipates negative FCF until 1Q22, compared to the earlier 3Q21.
Boeing announced it plans on cutting an additional 7,000 tasks. The business entered 2020 with 160,000 employees and has already reduced staff members by 19,000. The A&D giant said it expects to cut the workforce lowered by to 130,000 by the end of 2021.
All of it points to an uphill fight, though Eisen thinks BA can turn a working profit in’ twenty one.
We believe profitability is still a wildcard as the business battles to eliminate price tag out of the device to offset an absence of demand recovery and often will basically be influenced by business need improving, Eisen said. Longer term, the structural moves to consolidate calculations by up to 30 %, investment in efficiencies, and for ever control cost should certainly supply upside as need recovers.
Further catalysts including the re certification of the 737 MAX, the potential incremental orders of business aircraft along with defense shrink honours, keep Eisen’s rating an Outperform (i.e. Buy). His price target, at $181, implies a twenty five % upside out of current levels. (to be able to view Eisen’s record, click here)
BA gets mixed reviews from Eisen’s colleagues but they lean to the bulls’ edge. Based on 8 Buys, 9 Holds and 1 Sell, the stock has a reasonable Buy consensus rating. Upside of ~24 % could remain in the cards, provided the $179 usual price target. (See Boeing stock analysis on TipRanks)