Is Boeing Stock a Buy Following Q3 Earnings?
As restrictions tightened in Europe amidst soaring new coronavirus cases, U.S. stock market went right into a tailspin this week. Naturally, the aviation market was not spared, and in spite of better than expected Q3 earnings, neither was Boeing (BA). The stock finished the week down fourteen %, further contributing to 2020’s poor performance.
Expectations were low heading into the quarter’s print files, 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 nevertheless beat the Street’s forecast by $140 million. The loss on the bottom line was not as bad as expected, either, with Non-GAAP EPS of 1dolar1 1.39 beating opinion by $0.55.
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Boeing reported poor (FCF) no cost money flow of $5.08 billion, however, still, the figure was an enhancement on the previous quarter’s negative $5.6 billion. Nonetheless, with a great deal of uncertainty surrounding the aviation industry, Boeing’s hope of turning cash flow positive next year appears a tad optimistic.
Being an end result, RBC analyst Michael Eisen cut his 2021 estimate from FCF development of $3.9 billion to a money burn up of $5.3 billion. The change is mainly driven by additional create of inventory,” which the analyst sees “surpassing $90 BN in early’ 21,” as well as “a delay within the timing of liquidating those commercial aircraft. Eisen now anticipates negative FCF until 1Q22, compared to the previous 3Q21.
Boeing announced it plans on cutting a more 7,000 jobs. The company entered 2020 with 160,000 employees and has already reduced staff by 19,000. The A&D giant stated it expects to cut the workforce lowered by to 130,000 by the end of 2021.
It all points to an uphill fight, though Eisen believes BA can turn a working profit in’ 21.
We believe profitability is still a wildcard as the business battles to eliminate price out of the system to offset a lack of demand recovery and often will mainly be influenced by commercial demand improving, Eisen said. Longer-term, the structural techniques to consolidate calculations by up to thirty %, buy in efficiencies, and for ever management cost should really supply upside as desire recovers.
Additional catalysts like the re-certification of the 737-MAX, the potential incremental orders of business aircraft in addition to safeguard contract honours, don’t stop Eisen’s rating an Outperform (i.e. Buy). His price target, at $181, implies a 25 % upside from 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. In accordance with 8 Buys, nine Holds and one Sell, the stock has a reasonable Buy consensus rating. Upside of ~24 % might stay in the cards, provided the $179 typical price target. (See Boeing stock analysis on TipRanks)