Is Boeing Stock a Buy Following Q3 Earnings?
As constraints tightened in Europe amidst soaring fresh coronavirus cases, U.S. stock market went right into a tailspin this week. Of course, the aviation industry was not spared, and in spite of better than anticipated Q3 earnings, neither was Boeing (BA). The stock finished the week down 14 %, further contributing to 2020’s poor performance.
Expectations had been low proceeding into the quarter’s print, and also despite posting a quarter consecutive quarterly loss, Boeing’s third-quarter results came in in advance of Wall Street estimates.
Revenue dropped by 29.4 % year-over-year, yet usually at $14.1 billion nonetheless beat the Street’s forecast by $140 huge number of. The loss on the main point here was not as bad as expected, either, with Non GAAP EPS of 1dolar1 1.39 beating popular opinion by $0.55.
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Boeing reported negative (FCF) free money flow of $5.08 billion, yet still, the figure was an enhancement on the earlier quarter’s negative $5.6 billion. Nevertheless, with a great deal of uncertainty surrounding the aviation business, Boeing’s hope of transforming money flow positive next year appears a tad optimistic.
As a result, RBC analyst Michael Eisen lower his 2021 estimation from FCF generation of $3.9 billion to a dollars burn up of $5.3 billion. The change is mainly driven by additional build of inventory,” that the analyst sees “surpassing $90 BN in danger of early’ 21,” as well as “a lag time inside the timing of liquidating those commercial aircraft. Eisen currently anticipates negative FCF until 1Q22, compared to the earlier 3Q21.
Boeing announced it strategies on cutting an extra 7,000 jobs. The business entered 2020 with 160,000 employees and has already reduced staff by 19,000. The A&D giant stated it expects to reduce the workforce down to 130,000 by the end of 2021.
It all points to an uphill struggle, although Eisen believes BA is able to transform an operating profit in’ twenty one.
We believe profitability is still a wildcard as the company battles to eliminate price out of the device to offset an absence of demand recovery and will mainly be influenced by commercial need improving, Eisen said. Longer-term, the structural techniques to consolidate operations by up to thirty %, buy of efficiencies, and completely management expense will need to supply upside as need recovers.
Further catalysts like the re certification of the 737 MAX, the potential incremental orders of commercial aircraft plus safety shrink awards, continue Eisen’s rating an Outperform (i.e. Buy). The price target of his, at $181, implies a twenty five % upside from current levels. (In order to view Eisen’s background, press here)
BA gets reviews which are mixed from Eisen’s colleagues however they lean to the bulls’ side area. In accordance with 8 Buys, 9 Holds and 1 Sell, the stock has a moderate Buy consensus rating. Upside of ~24 % could stay in the cards, given the $179 typical price target. (See Boeing stock analysis on TipRanks)