Is Boeing Stock a Buy Following Q3 Earnings?
As limitations tightened in Europe amidst climbing fresh coronavirus instances, U.S. stock market went into a tailspin this week. Obviously, the aviation market wasn’t spared, and in spite of better than expected Q3 earnings, neither was Boeing (BA). The stock ended the week down 14 %, further contributing to 2020’s poor performance.
Expectations were low heading into the quarter’s print, and also 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 at $14.1 billion nonetheless beat the Street’s forecast by $140 huge number of. The loss on the main point here 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 reported poor (FCF) free cash flow of $5.08 billion, yet yet, the figure was an improvement on the earlier quarter’s negative $5.6 billion. Nevertheless, with so much uncertainty surrounding the aviation business, Boeing’s hope of converting cash flow positive next year appears a tad upbeat.
To be an outcome, RBC analyst Michael Eisen lower his 2021 estimate from FCF development of $3.9 billion to a cash burn of $5.3 billion. The change is mainly driven by additional build of inventory,” which the analyst sees “surpassing ninety dolars BN in early’ 21,” as well as “a delay in the timing of liquidating those commercial aircraft. Eisen now anticipates negative FCF until 1Q22, compared to the previous 3Q21.
Boeing announced it strategies on cutting a more 7,000 tasks. The company entered 2020 with 160,000 staff and has already decreased staff members by 19,000. The A&D giant said it expects to lower the workforce down to 130,000 by the conclusion of 2021.
All this points to an uphill struggle, although Eisen believes BA is able to turn a running profit in’ 21.
We believe profitability remains a wildcard as the company battles to eliminate cost out of the system to offset a lack of demand restoration and often will mostly be influenced by business need improving, Eisen said. Longer-term, the structural moves to consolidate functions by up to thirty %, buy in efficiencies, and permanently control expense will need to supply upside as demand recovers.
Further catalysts such as the re-certification of the 737 MAX, the possible incremental orders of business aircraft plus safety get smaller honours, keep Eisen’s rating an Outperform (i.e. Buy). The price target of his, during $181, implies a 25 % upside out of current levels. (In order to view Eisen’s background, press here)
BA gets reviews that are mixed from Eisen’s colleagues yet they lean to the bulls’ side. According to eight Buys, nine Holds and 1 Sell, the stock has a moderate Buy consensus rating. Upside of ~24 % could be in the cards, given the $179 typical price target. (See Boeing stock analysis on TipRanks)