Is Boeing Stock a Buy Following Q3 Earnings?
As limitations tightened in Europe amidst climbing fresh coronavirus cases, U.S. stock market went right into a tailspin this specific week. Naturally, the aviation market wasn’t spared, and despite better than anticipated Q3 earnings, neither was Boeing (BA). The stock finished the week down fourteen %, further contributing to 2020’s poor performance.
Expectations were low heading directly 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 usually at $14.1 billion still beat the Street’s forecast by $140 huge number of. The loss on the main point here wasn’t as terrible as expected, either, with Non GAAP EPS of -1dolar1 1.39 beating consensus by $0.55.
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Boeing reported poor (FCF) no cost money flow of $5.08 billion, yet still, the figure was an improvement on the preceding quarter’s negative $5.6 billion. Nevertheless, with so much uncertainty surrounding the aviation business, Boeing’s optimism of transforming money flow positive next year appears a tad optimistic.
As an end result, RBC analyst Michael Eisen cut 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 build of inventory,” that the analyst sees “surpassing ninety dolars BN in danger of early’ 21,” and “a lag time inside the timing of liquidating those commercial aircraft. Eisen now anticipates bad FCF until 1Q22, compared to the prior 3Q21.
Boeing announced it plans on cutting a more 7,000 jobs. The company entered 2020 with 160,000 employees and has already decreased staff by 19,000. The A&D giant said it expects to cut the workforce down to 130,000 by the end of 2021.
All of it points to an uphill fight, though Eisen thinks BA can transform a working profit in’ twenty one.
We believe profitability is still a wildcard as the business battles to eliminate price tag out of the device to offset a lack of demand restoration and will mostly be influenced by professional demand improving, Eisen said. Longer term, the structural moves to consolidate functions by up to thirty %, buy of efficiencies, and completely control cost should really provide upside as demand recovers.
Additional catalysts such as the re-certification of the 737 MAX, the possible incremental orders of business aircraft along with safety shrink awards, 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 view Eisen’s background, press here)
BA gets reviews that are mixed from Eisen’s colleagues but they lean to the bulls’ edge. According to 8 Buys, nine Holds and one Sell, the stock has a moderate Buy consensus rating. Upside of ~24 % might remain in the cards, provided the $179 average priced target. (See Boeing stock analysis on TipRanks)