Is Boeing Stock a Buy Following Q3 Earnings?
As restrictions tightened in Europe amidst climbing new coronavirus instances, U.S. stock market went into a tailspin this week. Naturally, the aviation sector was not spared, and despite better than expected Q3 earnings, neither was Boeing (BA). The stock finished the week down 14 %, further adding to 2020’s bad performance.
Expectations were low proceeding directly into the quarter’s print files, and also 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, but usually at $14.1 billion nonetheless overcome 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 popular opinion by $0.55.
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Boeing reported bad (FCF) no cost cash flow of $5.08 billion, yet still, the figure was an improvement on the preceding quarter’s poor $5.6 billion. Nevertheless, with so much uncertainty surrounding the aviation business, Boeing’s optimism of transforming cash flow positive next year looks a tad optimistic.
To be an outcome, RBC analyst Michael Eisen lower his 2021 estimation from FCF development of $3.9 billion to a cash burn up of $5.3 billion. The change is mainly driven by further create of inventory,” which the analyst sees “surpassing ninety dolars BN to come down with early’ 21,” as well as “a lag time within the timing of liquidating those commercial aircraft. Eisen now anticipates negative FCF until 1Q22, when compared to the previous 3Q21.
Boeing announced it plans on cutting a more 7,000 jobs. The business entered 2020 with 160,000 employees and has already decreased staff members by 19,000. The A&D giant stated it expects to cut the workforce lowered by to 130,000 by the end of 2021.
All of it points to an uphill struggle, although Eisen believes BA can transform an operating profit in’ twenty one.
We feel profitability remains a wildcard as the company battles to get rid of price out of the system to offset an absence of demand restoration and will largely be determined by commercial need improving, Eisen said. Longer-term, the structural methods to consolidate calculations by up to thirty %, buy in efficiencies, and permanently control expense ought to supply upside as need recovers.
Further catalysts including the re certification of the 737 MAX, the possible incremental orders of commercial aircraft plus defense contract awards, keep Eisen’s rating an Outperform (i.e. Buy). The price target of his, during $181, implies a 25 % upside out of existing levels. (To watch Eisen’s background, press here)
BA gets mixed reviews from Eisen’s colleagues yet they lean to the bulls’ side. Based on eight Buys, nine Holds and 1 Sell, the stock has a moderate Buy consensus rating. Upside of ~24 % might possibly stay in the cards, given the $179 usual price target. (See Boeing stock analysis on TipRanks)