Is Boeing Stock a Buy Following Q3 Earnings?

As restrictions tightened in Europe amidst rising fresh coronavirus instances, U.S. stock market went into a tailspin this specific week. Naturally, the aviation sector was not spared, and despite better than expected Q3 earnings, neither was Boeing (BA). The stock concluded the week down 14 %, further contributing to 2020’s poor performance.

Expectations had been low heading directly into the quarter’s print files, and even with posting a fourth consecutive quarterly loss, Boeing’s third-quarter results came in in front 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 million. The loss on the bottom line was not as terrible as expected, either, with Non GAAP EPS of 1dolar1 1.39 beating opinion by $0.55.

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Boeing reported negative (FCF) no cost money flow of $5.08 billion, nonetheless, yet, the figure was an improvement on the preceding quarter’s negative $5.6 billion. However, with so much uncertainty surrounding the aviation business, Boeing’s optimism of transforming 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 cash burn up of $5.3 billion. The change is mainly driven by further build of inventory,” which the analyst sees “surpassing ninety dolars BN in early’ 21,” and “a lag time inside the timing of liquidating those commercial aircraft. Eisen now anticipates negative FCF until 1Q22, compared to the prior 3Q21.

Boeing announced it plans on cutting an additional 7,000 tasks. The company entered 2020 with 160,000 workers and has already decreased staff by 19,000. The A&D giant mentioned it expects to lower the workforce down to 130,000 by the tail end of 2021.

All this points to an uphill struggle, nonetheless, Eisen thinks BA is able to turn a working profit in’ twenty one.

We feel profitability remains a wildcard as the business battles to eliminate price tag out of the system to offset a lack of demand restoration and will mostly be influenced by commercial demand improving, Eisen said. Longer term, the structural moves to consolidate operations by up to thirty %, buy of efficiencies, and for ever management cost will need to provide upside as desire recovers.

Further catalysts such as the re-certification of the 737 MAX, the potential incremental orders of commercial aircraft along with safeguard shrink awards, keep Eisen’s rating an Outperform (i.e. Buy). The price target of his, at $181, implies a 25 % upside from current levels. (to be able to view Eisen’s background, click here)

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