Is Boeing Stock a Buy Following Q3 Earnings?

Is Boeing Stock a Buy Following Q3 Earnings?

As restrictions tightened in Europe amidst soaring fresh coronavirus cases, U.S. stock market went right into a tailspin this specific week. Of course, the aviation sector was not spared, and despite better than anticipated Q3 earnings, neither was Boeing (BA). The stock ended the week down fourteen %, further adding to 2020’s poor performance.

Expectations were low heading into the quarter’s print, as well as despite 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 at $14.1 billion nevertheless beat the Street’s forecast by $140 million. The loss on the bottom line wasn’t as bad as expected, also, with Non GAAP EPS of 1dolar1 1.39 beating consensus by $0.55.

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Boeing found poor (FCF) free money flow of $5.08 billion, yet even now, the figure was an improvement on the earlier quarter’s negative $5.6 billion. But, with so much uncertainty surrounding the aviation business, Boeing’s hope of converting cash flow positive next year looks a tad upbeat.

Being a result, RBC analyst Michael Eisen cut his 2021 estimate from FCF development of $3.9 billion to a hard cash burn up of $5.3 billion. The change is mainly driven by further create of inventory,” that the analyst sees “surpassing ninety dolars BN to come down with early’ 21,” and “a lag time within the timing of liquidating those commercial aircraft. Eisen now anticipates bad FCF until 1Q22, compared to the previous 3Q21.

Boeing announced it strategies on cutting a more 7,000 jobs. The business entered 2020 with 160,000 workers and has already decreased staff by 19,000. The A&D giant said it expects to cut the workforce lowered by to 130,000 by the end of 2021.

It all points to an uphill struggle, although Eisen thinks BA is able to turn a running profit in’ 21.

We feel profitability remains a wildcard as the company battles to eliminate price tag out of the system to offset a lack of demand recovery and often will mostly be influenced by professional need improving, Eisen said. Longer term, the structural methods to consolidate functions by up to 30 %, investment in efficiencies, and completely control cost must provide upside as desire recovers.

Additional catalysts including the re-certification of the 737-MAX, the possible incremental orders of business aircraft in addition to safeguard get smaller awards, keep Eisen’s rating an Outperform (i.e. Buy). The price target of his, during $181, implies a twenty five % upside from current levels. (to be able to view Eisen’s track record, click here)

BA gets reviews which are mixed from Eisen’s colleagues however they lean to the bulls’ side area. Based on 8 Buys, 9 Holds and one Sell, the stock has a moderate Buy consensus rating. Upside of ~24 % might stay in the cards, given the $179 typical priced target. (See Boeing stock evaluation on TipRanks)