Is Boeing Stock a Buy Following Q3 Earnings?
As limitations tightened in Europe amidst climbing fresh coronavirus cases, U.S. stock market went into a tailspin this week. Naturally, the aviation industry was not spared, and despite better than expected Q3 earnings, neither was Boeing (BA). The stock finished the week down 14 %, further contributing to 2020’s poor performance.
Expectations had been low heading directly into the quarter’s print files, and even with posting a fourth consecutive quarterly loss, Boeing’s third quarter results came in in advance of Wall Street estimates.
Revenue dropped by 29.4 % year-over-year, but at $14.1 billion still beat the Street’s forecast by $140 million. The loss on the bottom line wasn’t as terrible as expected, also, with Non GAAP EPS of 1dolar1 1.39 beating opinion by $0.55.
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Boeing found poor (FCF) no cost money flow of $5.08 billion, nonetheless, still, the figure was an enhancement on the earlier quarter’s poor $5.6 billion. Nevertheless, with a great deal of uncertainty surrounding the aviation business, Boeing’s optimism of transforming money flow positive next year appears a tad optimistic.
Being a result, RBC analyst Michael Eisen lower his 2021 estimation from FCF development of $3.9 billion to a cash burn up of $5.3 billion. The change is mostly driven by further create of inventory,” that the analyst sees “surpassing $90 BN in danger of early’ 21,” as well as “a lag time in the timing of liquidating those business aircraft. Eisen now anticipates negative FCF until 1Q22, compared to the previous 3Q21.
Boeing announced it plans on cutting an additional 7,000 tasks. The business entered 2020 with 160,000 staff and has already decreased staff by 19,000. The A&D giant said it expects to reduce the workforce down to 130,000 by the tail end of 2021.
All of it points to an uphill fight, even thought Eisen thinks BA is able to transform a working profit in’ twenty one.
We believe profitability remains a wildcard as the company battles to get rid of cost out of the system to offset an absence of demand recovery and can mainly be influenced by business demand improving, Eisen said. Longer term, the structural methods to consolidate calculations by up to 30 %, investment of efficiencies, and completely management expense should certainly supply upside as need recovers.
Further catalysts like the re-certification of the 737-MAX, the possible 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 existing levels. (In order to watch Eisen’s track record, press here)
BA gets reviews which are mixed from Eisen’s colleagues yet they lean to the bulls’ edge. Based on 8 Buys, nine Holds and 1 Sell, the stock has a reasonable Buy consensus rating. Upside of ~24 % might remain in the cards, given the $179 typical priced target. (See Boeing stock evaluation on TipRanks)