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 particular week. Obviously, the aviation industry wasn’t spared, and despite better than anticipated Q3 earnings, neither was Boeing (BA). The stock finished the week down fourteen %, further adding to 2020’s poor performance.
Expectations were low proceeding into the quarter’s print, as well as despite publishing 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 nevertheless overcome the Street’s forecast by $140 zillion. The loss on the main point here was not as bad as expected, either, with Non GAAP EPS of -1dolar1 1.39 beating opinion by $0.55.
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Boeing found poor (FCF) free cash flow of $5.08 billion, nonetheless, still, the figure was an improvement on the prior quarter’s negative $5.6 billion. But, with so much uncertainty surrounding the aviation industry, Boeing’s hope of turning cash flow positive next year appears a tad optimistic.
As an end result, RBC analyst Michael Eisen cut his 2021 estimate from FCF generation of $3.9 billion to a hard cash burn of $5.3 billion. The change is mainly driven by further build of inventory,” which the analyst sees “surpassing $90 BN to come down with early’ 21,” and also “a lag time inside the timing of liquidating those business aircraft. Eisen now anticipates bad FCF until 1Q22, when compared to the prior 3Q21.
Boeing announced it plans on cutting an extra 7,000 tasks. The company entered 2020 with 160,000 employees and has already decreased staff by 19,000. The A&D giant mentioned it expects to cut the workforce down to 130,000 by the tail end of 2021.
It all points to an uphill struggle, though Eisen believes BA can turn a running profit in’ 21.
We feel profitability remains a wildcard as the business battles to eliminate price out of the system to offset a lack of demand recovery and will mostly be dependent on professional need improving, Eisen said. Longer term, the structural techniques to consolidate calculations by up to thirty %, buy in efficiencies, and for ever management expense should certainly supply upside as demand recovers.
Further catalysts like the re-certification of the 737-MAX, the potential incremental orders of business aircraft in addition to defense contract honours, continue Eisen’s rating an Outperform (i.e. Buy). The price target of his, at $181, implies a 25 % upside from existing levels. (To watch Eisen’s track record, click here)
BA gets mixed reviews from Eisen’s colleagues but they lean to the bulls’ side. In accordance with eight Buys, 9 Holds and 1 Sell, the stock has a reasonable Buy consensus rating. Upside of ~24 % might be in the cards, provided the $179 usual priced target. (See Boeing stock evaluation on TipRanks)