Is Boeing Stock a Buy Following Q3 Earnings?
As restrictions tightened in Europe amidst rising new coronavirus cases, U.S. stock market went right into a tailspin this specific week. Of course, the aviation industry wasn’t spared, and despite better than expected Q3 earnings, neither was Boeing (BA). The stock ended the week down 14 %, further contributing to 2020’s bad performance.
Expectations had been low proceeding directly into the quarter’s print documents, and even with posting a quarter consecutive quarterly loss, Boeing’s third-quarter results came in in advance of Wall Street estimates.
Revenue decreased by 29.4 % year-over-year, yet at $14.1 billion nonetheless beat the Street’s forecast by $140 million. The loss on the bottom line was not as bad as expected, also, with Non-GAAP EPS of 1dolar1 1.39 beating popular opinion by $0.55.
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Boeing reported negative (FCF) free money flow of $5.08 billion, nonetheless, yet, the figure was an enhancement on the earlier quarter’s poor $5.6 billion. However, with so much uncertainty surrounding the aviation business, Boeing’s hope of turning cash flow positive next year appears a tad upbeat.
Being an outcome, RBC analyst Michael Eisen lower his 2021 estimation from FCF generation of $3.9 billion to a dollars burn up of $5.3 billion. The change is mostly driven by further create of inventory,” that the analyst sees “surpassing $90 BN to come down with early’ 21,” as well as “a delay inside the timing of liquidating those business 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 company entered 2020 with 160,000 employees and has already reduced staff members by 19,000. The A&D giant said it expects to cut the workforce lowered by to 130,000 by the conclusion of 2021.
It all points to an uphill fight, even thought Eisen believes BA is able to transform a working profit in’ 21.
We feel profitability is still a wildcard as the company battles to remove cost out of the system to offset a lack of demand recovery and often will mostly be determined by commercial demand improving, Eisen said. Longer term, the structural techniques to consolidate functions by up to 30 %, buy of efficiencies, and permanently control cost really should provide upside as need recovers.
Further catalysts including the re-certification of the 737 MAX, the potential incremental orders of commercial aircraft in addition to safeguard contract awards, continue Eisen’s rating an Outperform (i.e. Buy). The price target of his, at $181, implies a twenty five % upside out of current levels. (to be able to watch Eisen’s background, press here)
BA gets reviews which are mixed from Eisen’s colleagues but they lean to the bulls’ side. According to eight Buys, 9 Holds and 1 Sell, the stock has a moderate Buy consensus rating. Upside of ~24 % might possibly remain in the cards, given the $179 typical price target. (See Boeing stock evaluation on TipRanks)