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. Of course, the aviation market wasn’t spared, and in spite of better than anticipated Q3 earnings, neither was Boeing (BA). The stock finished the week down fourteen %, further contributing to 2020’s bad performance.
Expectations were low proceeding directly into the quarter’s print documents, and despite publishing a fourth consecutive quarterly loss, Boeing’s third quarter results came in ahead of Wall Street estimates.
Revenue dropped by 29.4 % year-over-year, but usually at $14.1 billion still beat the Street’s forecast by $140 huge number of. 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 found bad (FCF) no cost cash flow of $5.08 billion, nevertheless, yet, the figure was an improvement on the preceding quarter’s negative $5.6 billion. But, with so much uncertainty surrounding the aviation business, Boeing’s hope of converting cash flow positive next year appears a tad upbeat.
Being a result, RBC analyst Michael Eisen lower his 2021 estimation from FCF generation of $3.9 billion to a hard cash burn of $5.3 billion. The change is mainly driven by further build of inventory,” that the analyst sees “surpassing $90 BN to come down with early’ 21,” and also “a lag time within the timing of liquidating those commercial aircraft. Eisen currently anticipates negative FCF until 1Q22, when compared to the earlier 3Q21.
Boeing announced it plans on cutting an extra 7,000 jobs. The business entered 2020 with 160,000 employees and has already decreased staff by 19,000. The A&D giant said it expects to reduce the workforce lowered by to 130,000 by the end of 2021.
All this points to an uphill struggle, although Eisen thinks BA can turn an operating profit in’ twenty one.
We feel profitability remains a wildcard as the business battles to remove price tag out of the system to offset an absence of demand recovery and will largely be determined by commercial need improving, Eisen said. Longer term, the structural techniques to consolidate calculations by up to 30 %, investment in efficiencies, and permanently control cost will need to provide upside as demand recovers.
Additional catalysts such as the re certification of the 737-MAX, the possible incremental orders of commercial aircraft along with defense shrink honours, don’t stop Eisen’s rating an Outperform (i.e. Buy). His price target, at $181, implies a 25 % upside from existing levels. (To watch Eisen’s background, click here)
BA gets reviews that are mixed from Eisen’s colleagues but they lean to the bulls’ side. In accordance with 8 Buys, 9 Holds and 1 Sell, the stock has a moderate Buy consensus rating. Upside of ~24 % might possibly be in the cards, given the $179 usual priced target. (See Boeing stock evaluation on TipRanks)