Is Boeing Stock a Buy Following Q3 Earnings?
As limitations tightened in Europe amidst rising fresh coronavirus cases, U.S. stock market went right into a tailspin this particular week. Of course, the aviation industry was not spared, and in spite of better than expected Q3 earnings, neither was Boeing (BA). The stock finished the week down 14 %, further adding to 2020’s bad performance.
Expectations had been low proceeding straight into the quarter’s print files, as well as even with posting a quarter consecutive quarterly loss, Boeing’s third quarter results came in ahead of Wall Street estimates.
Revenue dropped by 29.4 % year-over-year, but during $14.1 billion nonetheless beat the Street’s forecast by $140 huge number of. The loss on the bottom line was not as bad as expected, also, with Non-GAAP EPS of -1dolar1 1.39 beating opinion by $0.55.
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Boeing reported negative (FCF) no cost cash flow of $5.08 billion, however, yet, the figure was an improvement on the previous 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 looks a tad upbeat.
Being a result, RBC analyst Michael Eisen lower his 2021 estimate from FCF development of $3.9 billion to a hard cash burn of $5.3 billion. The change is mainly driven by additional build of inventory,” that the analyst sees “surpassing ninety dolars BN in danger of early’ 21,” and “a delay within the timing of liquidating those business aircraft. Eisen now anticipates negative FCF until 1Q22, when compared to the previous 3Q21.
Boeing announced it strategies on cutting a more 7,000 tasks. The business entered 2020 with 160,000 employees and has already reduced staff by 19,000. The A&D giant said it expects to cut the workforce lowered by to 130,000 by the tail end of 2021.
All of it points to an uphill fight, nevertheless, Eisen thinks BA is able to transform an operating profit in’ 21.
We believe profitability remains a wildcard as the company battles to eliminate price out of the system to offset a lack of demand recovery and can mostly be dependent on business demand improving, Eisen said. Longer term, the structural methods to consolidate operations by up to 30 %, investment of efficiencies, and permanently control expense should certainly supply upside as desire recovers.
Additional catalysts like the re certification of the 737 MAX, the potential incremental orders of commercial aircraft in addition to safety get smaller honours, don’t stop Eisen’s rating an Outperform (i.e. Buy). The price target of his, at $181, implies a 25 % upside from existing levels. (to be able to watch Eisen’s record, click here)
BA gets mixed reviews from Eisen’s colleagues but they lean to the bulls’ edge. According to 8 Buys, nine Holds and 1 Sell, the stock has a reasonable Buy consensus rating. Upside of ~24 % might possibly be in the cards, provided the $179 usual priced target. (See Boeing stock evaluation on TipRanks)