Is Boeing Stock a Buy Following Q3 Earnings?
As limitations tightened in Europe amidst soaring fresh coronavirus instances, U.S. stock market went right into a tailspin this specific week. Naturally, the aviation market wasn’t spared, and despite better than anticipated Q3 earnings, neither was Boeing (BA). The stock ended the week down 14 %, further adding to 2020’s bad performance.
Expectations were low heading into the quarter’s print, as well as even with posting a fourth consecutive quarterly loss, Boeing’s third quarter results came in ahead of Wall Street estimates.
Revenue decreased by 29.4 % year-over-year, yet during $14.1 billion still beat the Street’s forecast by $140 zillion. The loss on the bottom line was not as bad as expected, either, with Non-GAAP EPS of -1dolar1 1.39 beating consensus by $0.55.
Read also about:
Boeing found poor (FCF) free cash flow of $5.08 billion, nevertheless, yet, the figure was a development on the preceding quarter’s negative $5.6 billion. Nevertheless, with so much uncertainty surrounding the aviation industry, Boeing’s optimism of turning cash flow positive next year appears a tad optimistic.
Being an outcome, RBC analyst Michael Eisen cut his 2021 estimation from FCF generation of $3.9 billion to a cash burn up of $5.3 billion. The change is mostly driven by further create of inventory,” which the analyst sees “surpassing ninety dolars BN in danger of early’ 21,” as well as “a lag time inside the timing of liquidating those commercial aircraft. Eisen currently anticipates bad FCF until 1Q22, when compared to the earlier 3Q21.
Boeing announced it plans on cutting a more 7,000 jobs. The business entered 2020 with 160,000 staff and has already decreased staff by 19,000. The A&D giant said it expects to lower the workforce down to 130,000 by the tail end of 2021.
It all points to an uphill struggle, however, Eisen thinks BA can transform a working profit in’ 21.
We believe profitability remains a wildcard as the company battles to remove cost out of the system to offset a lack of demand restoration and can largely be influenced by professional need improving, Eisen said. Longer term, the structural moves to consolidate functions by up to 30 %, buy in efficiencies, and for ever control expense really should provide upside as desire recovers.
Additional catalysts including the re certification of the 737 MAX, the possible incremental orders of commercial aircraft along with safeguard get smaller 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 mixed reviews from Eisen’s colleagues but they lean to the bulls’ side. In accordance with 8 Buys, 9 Holds and one Sell, the stock has a moderate Buy consensus rating. Upside of ~24 % could remain in the cards, provided the $179 typical price target. (See Boeing stock analysis on TipRanks)