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. Naturally, the aviation market was not spared, and despite better than expected Q3 earnings, neither was Boeing (BA). The stock finished the week down fourteen %, further contributing to 2020’s bad performance.
Expectations had been low heading straight into the quarter’s print, as well as even with 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, yet usually at $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 consensus by $0.55.
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Boeing reported poor (FCF) no cost money flow of $5.08 billion, nonetheless, yet, the figure was a development on the preceding quarter’s negative $5.6 billion. Nonetheless, with so much uncertainty surrounding the aviation business, Boeing’s optimism of turning cash flow positive next year looks a tad upbeat.
Being an end result, RBC analyst Michael Eisen cut his 2021 estimate from FCF development of $3.9 billion to a dollars burn of $5.3 billion. The change is mostly driven by additional create of inventory,” that the analyst sees “surpassing $90 BN to come down with early’ 21,” and “a lag time within the timing of liquidating those business aircraft. Eisen now anticipates negative FCF until 1Q22, compared to the previous 3Q21.
Boeing announced it strategies on cutting a more 7,000 jobs. The business entered 2020 with 160,000 staff and has already decreased staff by 19,000. The A&D giant said it expects to cut the workforce lowered by to 130,000 by the end of 2021.
All of it points to an uphill fight, although Eisen believes BA can transform an operating profit in’ 21.
We believe profitability remains a wildcard as the business battles to eliminate price tag out of the system to offset a lack of demand restoration and can largely be dependent on commercial demand improving, Eisen said. Longer term, the structural methods to consolidate operations by up to 30 %, buy in efficiencies, and completely control expense should certainly supply upside as desire recovers.
Additional catalysts like the re certification of the 737 MAX, the possible incremental orders of business aircraft plus safety get smaller 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 view Eisen’s track record, press here)
BA gets reviews that are mixed from Eisen’s colleagues yet they lean to the bulls’ side. In accordance with eight 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 average price target. (See Boeing stock analysis on TipRanks)