Is Boeing Stock a Buy Following Q3 Earnings?
As restrictions tightened in Europe amidst rising new coronavirus instances, U.S. stock market went into a tailspin this specific week. Obviously, the aviation market was not spared, and despite better than expected Q3 earnings, neither was Boeing (BA). The stock ended the week down 14 %, further adding to 2020’s poor performance.
Expectations had been low heading straight into the quarter’s print files, and also despite publishing a fourth consecutive quarterly loss, Boeing’s third-quarter results came in in front of Wall Street estimates.
Revenue dropped by 29.4 % year-over-year, but usually at $14.1 billion nonetheless beat the Street’s forecast by $140 million. The loss on the bottom line was not as terrible as expected, also, with Non GAAP EPS of 1dolar1 1.39 beating opinion by $0.55.
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Boeing reported bad (FCF) free cash flow of $5.08 billion, nevertheless, even now, the figure was an enhancement on the previous quarter’s negative $5.6 billion. Nevertheless, with so much uncertainty surrounding the aviation business, Boeing’s optimism of transforming money flow positive next year looks a tad optimistic.
To be an end result, RBC analyst Michael Eisen cut his 2021 estimation from FCF generation of $3.9 billion to a cash burn up of $5.3 billion. The change is mostly driven by further build of inventory,” that the analyst sees “surpassing ninety dolars BN to come down with early’ 21,” as well as “a delay inside the timing of liquidating those business aircraft. Eisen currently anticipates negative FCF until 1Q22, compared to the earlier 3Q21.
Boeing announced it strategies on cutting a more 7,000 jobs. The business entered 2020 with 160,000 workers and has already reduced staff members by 19,000. The A&D giant said it expects to reduce the workforce down to 130,000 by the end of 2021.
All of it points to an uphill fight, even thought Eisen believes BA is able to transform a working profit in’ 21.
We believe profitability remains a wildcard as the business battles to get rid of cost out of the system to offset an absence of demand recovery and often will mainly be determined by business demand improving, Eisen said. Longer-term, the structural moves to consolidate functions by up to thirty %, investment in efficiencies, and permanently management expense should certainly provide upside as demand recovers.
Additional catalysts like the re-certification of the 737-MAX, the possible incremental orders of business aircraft plus safeguard contract awards, continue Eisen’s rating an Outperform (i.e. Buy). His price target, at $181, implies a 25 % upside out of existing levels. (In order to watch Eisen’s background, click here)
BA gets mixed reviews from Eisen’s colleagues yet they lean to the bulls’ side area. According to 8 Buys, 9 Holds and one Sell, the stock has a moderate Buy consensus rating. Upside of ~24 % might stay in the cards, provided the $179 usual priced target. (See Boeing stock evaluation on TipRanks)