Is Boeing Stock a Buy Following Q3 Earnings?
As limitations tightened in Europe amidst rising fresh coronavirus cases, U.S. stock market went into a tailspin this specific week. Obviously, the aviation market was not spared, and despite better than expected Q3 earnings, neither was Boeing (BA). The stock concluded the week down fourteen %, further adding to 2020’s poor performance.
Expectations had been low heading into the quarter’s print, and even with publishing a quarter consecutive quarterly loss, Boeing’s third quarter results came in ahead of Wall Street estimates.
Revenue decreased by 29.4 % year-over-year, but usually at $14.1 billion still overcome 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, however, still, the figure was an enhancement on the prior quarter’s negative $5.6 billion. However, with a great deal of uncertainty surrounding the aviation business, Boeing’s optimism of turning cash flow positive next year looks a tad optimistic.
To be an end result, RBC analyst Michael Eisen lower his 2021 estimation from FCF development of $3.9 billion to a hard cash burn of $5.3 billion. The change is mainly driven by further create of inventory,” which the analyst sees “surpassing ninety dolars BN in early’ 21,” as well as “a delay in the timing of liquidating those commercial aircraft. Eisen currently anticipates bad FCF until 1Q22, compared to the prior 3Q21.
Boeing announced it plans on cutting an extra 7,000 tasks. The company entered 2020 with 160,000 workers and has already reduced staff members by 19,000. The A&D giant said it expects to lower the workforce down to 130,000 by the conclusion of 2021.
All this points to an uphill struggle, although Eisen thinks BA is able to transform an operating profit in’ twenty one.
We feel profitability is still a wildcard as the business battles to remove price tag out of the system to offset an absence of demand recovery and often will mostly be influenced by business demand improving, Eisen said. Longer term, the structural methods to consolidate functions by up to 30 %, investment of efficiencies, and for ever management cost really should provide upside as demand recovers.
Additional catalysts such as the re certification of the 737-MAX, the potential incremental orders of business aircraft plus safety shrink awards, continue Eisen’s rating an Outperform (i.e. Buy). The price target of his, during $181, implies a 25 % upside from existing levels. (to be able to watch Eisen’s record, press here)
BA gets mixed reviews from Eisen’s colleagues but they lean to the bulls’ side. Based on eight Buys, nine Holds and one Sell, the stock has a reasonable Buy consensus rating. Upside of ~24 % might possibly remain in the cards, provided the $179 average price target. (See Boeing stock analysis on TipRanks)