Is Boeing Stock a Buy Following Q3 Earnings?
As restrictions tightened in Europe amidst climbing new coronavirus cases, U.S. stock market went into a tailspin this week. Obviously, the aviation market was not spared, and despite better than anticipated Q3 earnings, neither was Boeing (BA). The stock ended the week down fourteen %, further adding to 2020’s poor performance.
Expectations were low proceeding directly into the quarter’s print files, and even with posting 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 nevertheless overcome the Street’s forecast by $140 zillion. The loss on the main point here was not as bad as expected, either, with Non GAAP EPS of -1dolar1 1.39 beating popular opinion by $0.55.
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Boeing found bad (FCF) no cost money flow of $5.08 billion, however, still, the figure was an improvement on the previous quarter’s negative $5.6 billion. Nevertheless, with a great deal of uncertainty surrounding the aviation industry, Boeing’s hope of turning money flow positive next year looks a tad optimistic.
Being an outcome, RBC analyst Michael Eisen cut his 2021 estimate from FCF development of $3.9 billion to a cash burn of $5.3 billion. The change is mostly driven by additional create of inventory,” which the analyst sees “surpassing ninety dolars BN in danger of early’ 21,” and also “a lag time inside 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 extra 7,000 jobs. The company entered 2020 with 160,000 workers and has already decreased staff by 19,000. The A&D giant mentioned it expects to reduce the workforce down to 130,000 by the conclusion of 2021.
It all points to an uphill struggle, although Eisen believes BA can transform a working profit in’ twenty one.
We believe profitability remains a wildcard as the business battles to get rid of price tag out of the device to offset a lack of demand restoration and can mainly be influenced by business need improving, Eisen said. Longer term, the structural techniques to consolidate operations by up to 30 %, investment of efficiencies, and completely control expense must provide upside as demand recovers.
Further catalysts like the re-certification of the 737 MAX, the potential incremental orders of business aircraft plus safeguard contract awards, keep Eisen’s rating an Outperform (i.e. Buy). His price target, at $181, implies a 25 % upside out of current levels. (To view Eisen’s background, click here)
BA gets reviews that are mixed from Eisen’s colleagues yet they lean to the bulls’ edge. According to eight Buys, nine Holds and 1 Sell, the stock has a moderate Buy consensus rating. Upside of ~24 % might remain in the cards, provided the $179 typical priced target. (See Boeing stock evaluation on TipRanks)