Is Boeing Stock a Buy Following Q3 Earnings?
As constraints tightened in Europe amidst climbing new coronavirus cases, U.S. stock market went into a tailspin this particular week. Naturally, the aviation market wasn’t spared, and despite better than expected Q3 earnings, neither was Boeing (BA). The stock concluded the week down 14 %, further adding to 2020’s poor performance.
Expectations were low heading into the quarter’s print documents, and also despite publishing 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 nevertheless beat the Street’s forecast by $140 million. The loss on the main point here wasn’t as terrible as expected, also, with Non-GAAP EPS of 1dolar1 1.39 beating consensus by $0.55.
Read also about:
Boeing found negative (FCF) free cash flow of $5.08 billion, yet yet, the figure was an enhancement on the previous quarter’s negative $5.6 billion. However, with a great deal of uncertainty surrounding the aviation industry, Boeing’s optimism of converting cash flow positive next year looks a tad optimistic.
Being an outcome, RBC analyst Michael Eisen lower his 2021 estimate from FCF generation of $3.9 billion to a money burn up of $5.3 billion. The change is mostly driven by further create of inventory,” which the analyst sees “surpassing ninety dolars BN to come down with early’ 21,” as well as “a delay inside the timing of liquidating those commercial aircraft. Eisen currently anticipates negative FCF until 1Q22, compared to the prior 3Q21.
Boeing announced it strategies on cutting an extra 7,000 jobs. The company entered 2020 with 160,000 employees and has already reduced staff members by 19,000. The A&D giant stated it expects to lower the workforce lowered by to 130,000 by the conclusion of 2021.
It all points to an uphill fight, nonetheless, Eisen believes BA can turn a working profit in’ twenty one.
We feel profitability is still a wildcard as the business battles to get rid of price out of the system to offset an absence of demand recovery and often will mostly be determined by commercial demand improving, Eisen said. Longer term, the structural techniques to consolidate operations by up to 30 %, investment of efficiencies, and permanently control expense really should supply upside as desire recovers.
Further catalysts like the re-certification of the 737-MAX, the possible incremental orders of commercial aircraft plus defense get smaller honours, don’t stop Eisen’s rating an Outperform (i.e. Buy). His price target, during $181, implies a 25 % upside out of current levels. (In order to view Eisen’s record, 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, nine Holds and 1 Sell, the stock has a reasonable Buy consensus rating. Upside of ~24 % could stay in the cards, given the $179 average priced target. (See Boeing stock analysis on TipRanks)