Is Boeing Stock a Buy Following Q3 Earnings?
As limitations tightened in Europe amidst rising fresh coronavirus instances, U.S. stock market went right into a tailspin this week. Of course, the aviation industry was not spared, and despite better than expected Q3 earnings, neither was Boeing (BA). The stock concluded the week down 14 %, further adding to 2020’s bad performance.
Expectations had been low proceeding straight into the quarter’s print, and 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, yet at $14.1 billion nonetheless overcome the Street’s forecast by $140 zillion. The loss on the main point here wasn’t as bad as expected, either, with Non-GAAP EPS of 1dolar1 1.39 beating popular opinion by $0.55.
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Boeing reported negative (FCF) no cost cash flow of $5.08 billion, yet even now, the figure was a development on the prior quarter’s poor $5.6 billion. Nevertheless, with so much uncertainty surrounding the aviation industry, Boeing’s hope of turning cash flow positive next year looks a tad optimistic.
As a result, RBC analyst Michael Eisen cut his 2021 estimation from FCF development of $3.9 billion to a money burn up of $5.3 billion. The change is mostly driven by additional build of inventory,” that the analyst sees “surpassing $90 BN to come down with early’ 21,” and “a lag time in 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 additional 7,000 jobs. The business entered 2020 with 160,000 employees and has already decreased staff members by 19,000. The A&D giant mentioned it expects to reduce the workforce down to 130,000 by the tail end of 2021.
All this points to an uphill fight, although Eisen thinks BA can transform an operating profit in’ 21.
We feel profitability is still a wildcard as the company battles to eliminate cost out of the device to offset an absence of demand restoration and often will mostly be dependent on professional demand improving, Eisen said. Longer-term, the structural techniques to consolidate calculations by up to thirty %, buy of efficiencies, and for ever control expense will need to provide upside as desire recovers.
Additional catalysts such as the re-certification of the 737 MAX, the potential incremental orders of business aircraft in addition to safety shrink awards, keep Eisen’s rating an Outperform (i.e. Buy). The price target of his, during $181, implies a twenty five % upside from existing levels. (In order to view Eisen’s track record, press here)
BA gets reviews that are mixed from Eisen’s colleagues but they lean to the bulls’ side area. Based on 8 Buys, nine Holds and 1 Sell, the stock has a moderate Buy consensus rating. Upside of ~24 % might possibly be in the cards, provided the $179 usual priced target. (See Boeing stock evaluation on TipRanks)