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. Of course, the aviation industry wasn’t spared, and despite better than anticipated Q3 earnings, neither was Boeing (BA). The stock finished the week down 14 %, further contributing to 2020’s bad performance.
Expectations had been low proceeding into the quarter’s print, and also despite posting a fourth 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 at $14.1 billion nonetheless beat the Street’s forecast by $140 huge number of. The loss on the bottom line wasn’t as bad as expected, either, with Non-GAAP EPS of -1dolar1 1.39 beating opinion by $0.55.
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Boeing found bad (FCF) no cost cash flow of $5.08 billion, yet even now, the figure was a development on the earlier quarter’s negative $5.6 billion. But, with so much uncertainty surrounding the aviation industry, Boeing’s optimism of turning money flow positive next year appears a tad optimistic.
To be an end result, RBC analyst Michael Eisen cut his 2021 estimation from FCF generation of $3.9 billion to a money burn of $5.3 billion. The change is mostly driven by additional create of inventory,” that the analyst sees “surpassing ninety dolars BN in danger of early’ 21,” and “a lag time within the timing of liquidating those commercial aircraft. Eisen currently anticipates negative FCF until 1Q22, when compared to the prior 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 reduce the workforce down to 130,000 by the tail end of 2021.
All this points to an uphill struggle, however, Eisen believes BA is able to turn a working profit in’ 21.
We feel profitability remains a wildcard as the business battles to eliminate cost out of the system to offset a lack of demand recovery and will mainly be determined by professional need improving, Eisen said. Longer-term, the structural methods to consolidate calculations by up to thirty %, investment of efficiencies, and for ever management cost really should supply upside as desire recovers.
Additional catalysts like the re-certification of the 737 MAX, the potential incremental orders of business aircraft along with safeguard get smaller awards, don’t stop Eisen’s rating an Outperform (i.e. Buy). The price target of his, at $181, implies a twenty five % upside from current levels. (to be able to view Eisen’s track record, click here)
BA gets reviews which are mixed from Eisen’s colleagues but they lean to the bulls’ side. According to 8 Buys, 9 Holds and 1 Sell, the stock has a moderate Buy consensus rating. Upside of ~24 % might be in the cards, given the $179 average price target. (See Boeing stock analysis on TipRanks)