Is Boeing Stock a Buy Following Q3 Earnings?
As constraints tightened in Europe amidst rising new coronavirus cases, U.S. stock market went right into a tailspin this week. Obviously, the aviation industry wasn’t spared, and in spite of better than expected Q3 earnings, neither was Boeing (BA). The stock finished the week down fourteen %, further contributing to 2020’s bad performance.
Expectations were low proceeding into the quarter’s print, and also even with publishing a quarter consecutive quarterly loss, Boeing’s third-quarter results came in ahead of Wall Street estimates.
Revenue dropped by 29.4 % year-over-year, yet during $14.1 billion nonetheless overcome the Street’s forecast by $140 zillion. The loss on the bottom line wasn’t as terrible as expected, either, with Non GAAP EPS of 1dolar1 1.39 beating opinion by $0.55.
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Boeing reported negative (FCF) free cash flow of $5.08 billion, however, even now, the figure was an improvement on the previous quarter’s negative $5.6 billion. But, with a great deal of uncertainty surrounding the aviation business, Boeing’s hope of converting money flow positive next year looks a tad optimistic.
Being an outcome, RBC analyst Michael Eisen cut his 2021 estimation from FCF generation of $3.9 billion to a hard cash burn up of $5.3 billion. The change is mostly driven by further build of inventory,” which the analyst sees “surpassing $90 BN to come down with early’ 21,” and also “a lag time in the timing of liquidating those commercial aircraft. Eisen now anticipates negative FCF until 1Q22, compared to the earlier 3Q21.
Boeing announced it strategies on cutting an additional 7,000 jobs. The business entered 2020 with 160,000 staff and has already decreased staff members by 19,000. The A&D giant mentioned it expects to reduce the workforce down to 130,000 by the end of 2021.
All of it points to an uphill fight, nonetheless, Eisen believes BA can turn a working profit in’ 21.
We believe profitability is still a wildcard as the business battles to remove price out of the device to offset a lack of demand recovery and often will mainly be dependent on commercial need improving, Eisen said. Longer term, the structural techniques to consolidate calculations by up to 30 %, buy in efficiencies, and completely management expense should really supply upside as need recovers.
Additional catalysts such as the re-certification of the 737-MAX, the possible incremental orders of commercial aircraft in addition to safeguard get smaller honours, keep Eisen’s rating an Outperform (i.e. Buy). The price target of his, during $181, implies a twenty five % upside out of current levels. (to be able to view Eisen’s record, click here)
BA gets reviews which are mixed from Eisen’s colleagues yet they lean to the bulls’ side area. Based on eight Buys, 9 Holds and one Sell, the stock has a moderate Buy consensus rating. Upside of ~24 % might remain in the cards, provided the $179 usual price target. (See Boeing stock analysis on TipRanks)