Is Boeing Stock a Buy Following Q3 Earnings?
As limitations tightened in Europe amidst soaring new coronavirus cases, U.S. stock market went into a tailspin this particular week. Naturally, the aviation industry wasn’t spared, and despite better than anticipated Q3 earnings, neither was Boeing (BA). The stock ended the week down 14 %, further adding to 2020’s bad performance.
Expectations had been low heading into the quarter’s print, and 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, but during $14.1 billion still beat the Street’s forecast by $140 zillion. The loss on the main point here was not as terrible as expected, either, with Non GAAP EPS of -1dolar1 1.39 beating popular opinion by $0.55.
Read also about:
Boeing reported negative (FCF) free cash flow of $5.08 billion, nonetheless, even now, the figure was an improvement on the prior quarter’s negative $5.6 billion. But, with so much uncertainty surrounding the aviation industry, Boeing’s hope of turning money flow positive next year appears a tad upbeat.
Being an end result, RBC analyst Michael Eisen cut his 2021 estimation from FCF development of $3.9 billion to a dollars burn up of $5.3 billion. The change is mostly driven by additional create of inventory,” that the analyst sees “surpassing $90 BN in early’ 21,” as well as “a lag time inside the timing of liquidating those commercial aircraft. Eisen currently anticipates bad FCF until 1Q22, compared to the previous 3Q21.
Boeing announced it plans on cutting an additional 7,000 jobs. The business entered 2020 with 160,000 staff and has already reduced staff by 19,000. The A&D giant said it expects to reduce the workforce down to 130,000 by the tail end of 2021.
It all points to an uphill struggle, nonetheless, Eisen believes BA can turn an operating profit in’ twenty one.
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 will mostly be influenced by commercial demand improving, Eisen said. Longer-term, the structural moves to consolidate functions by up to thirty %, investment in efficiencies, and permanently control expense will need to supply upside as demand recovers.
Further catalysts like the re-certification of the 737 MAX, the possible incremental orders of business aircraft in addition to safeguard get smaller awards, don’t stop Eisen’s rating an Outperform (i.e. Buy). His price target, at $181, implies a twenty five % upside out of existing levels. (to be able to watch Eisen’s track record, click here)
BA gets mixed reviews from Eisen’s colleagues but they lean to the bulls’ side area. In accordance with eight Buys, nine Holds and one Sell, the stock has a moderate Buy consensus rating. Upside of ~24 % might remain in the cards, given the $179 average price target. (See Boeing stock analysis on TipRanks)