Is Boeing Stock a Buy Following Q3 Earnings?
As restrictions tightened in Europe amidst climbing fresh coronavirus cases, U.S. stock market went into a tailspin this particular week. Obviously, the aviation industry was not spared, and in spite of better than anticipated Q3 earnings, neither was Boeing (BA). The stock ended the week down 14 %, further contributing to 2020's poor performance.
Expectations had been low heading straight into the quarter's print, and even with publishing a quarter consecutive quarterly loss, Boeing's third-quarter results came in in front of Wall Street estimates.
Revenue decreased by 29.4 % year-over-year, but usually at $14.1 billion still 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 opinion by $0.55.
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Boeing reported poor (FCF) no cost cash flow of $5.08 billion, yet yet, the figure was an improvement on the previous quarter's poor $5.6 billion. Nonetheless, with a great deal of uncertainty surrounding the aviation business, Boeing's optimism of turning cash flow positive next year appears a tad optimistic.
As an outcome, RBC analyst Michael Eisen lower his 2021 estimate from FCF development of $3.9 billion to a cash burn up of $5.3 billion. The change is mainly driven by additional build of inventory," which the analyst sees "surpassing ninety dolars BN in danger of early' 21," and "a lag time inside the timing of liquidating those business aircraft. Eisen currently anticipates negative FCF until 1Q22, compared to the earlier 3Q21.
Boeing announced it plans on cutting a more 7,000 jobs. The company entered 2020 with 160,000 staff and has already reduced staff by 19,000. The A&D giant said it expects to cut the workforce down to 130,000 by the conclusion of 2021.
All this points to an uphill struggle, however, Eisen believes BA can transform a running profit in' 21.
We believe profitability is still a wildcard as the business battles to get rid of cost out of the device to offset a lack of demand recovery and often will mostly be dependent on business demand improving, Eisen said. Longer term, the structural moves to consolidate functions by up to thirty %, investment of efficiencies, and permanently control expense should certainly supply upside as desire recovers.
Additional catalysts such as the re-certification of the 737-MAX, the potential incremental orders of commercial aircraft in addition to safeguard contract awards, keep Eisen's rating an Outperform (i.e. Buy). The price target of his, during $181, implies a 25 % upside from current levels. (To view Eisen's track record, click here)
BA gets reviews which are mixed from Eisen's colleagues but they lean to the bulls' side area. Based on 8 Buys, nine Holds and 1 Sell, the stock has a reasonable Buy consensus rating. Upside of ~24 % might be in the cards, given the $179 usual price target. (See Boeing stock analysis on TipRanks)