Is Boeing Stock a Buy Following Q3 Earnings?

As constraints tightened in Europe amidst climbing new coronavirus instances, U.S. stock market went into a tailspin this specific week. Obviously, the aviation sector wasn’t spared, and despite 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 proceeding straight into the quarter’s print, and also even with posting a fourth consecutive quarterly loss, Boeing’s third-quarter results came in ahead of Wall Street estimates.

Revenue decreased by 29.4 % year-over-year, yet during $14.1 billion nevertheless beat the Street’s forecast by $140 million. The loss on the main point here was not as terrible as expected, either, with Non GAAP EPS of 1dolar1 1.39 beating popular opinion by $0.55.

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Boeing reported negative (FCF) free cash flow of $5.08 billion, nevertheless, even now, the figure was an improvement on the previous quarter’s negative $5.6 billion. However, with a great deal of uncertainty surrounding the aviation industry, Boeing’s hope of turning cash flow positive next year looks a tad optimistic.

Being an outcome, RBC analyst Michael Eisen cut his 2021 estimation from FCF development of $3.9 billion to a cash burn up of $5.3 billion. The change is mostly driven by further create of inventory,” that the analyst sees “surpassing ninety dolars BN in danger of early’ 21,” and “a delay in the timing of liquidating those business aircraft. Eisen now anticipates bad FCF until 1Q22, compared to the previous 3Q21.

Boeing announced it plans on cutting a more 7,000 tasks. The company entered 2020 with 160,000 workers and has already decreased staff members by 19,000. The A&D giant stated it expects to cut the workforce down to 130,000 by the conclusion of 2021.

It all points to an uphill fight, although Eisen thinks BA can turn an operating profit in’ twenty one.

We believe profitability remains a wildcard as the business battles to get rid of cost out of the system to offset an absence of demand restoration and can largely be determined by business need improving, Eisen said. Longer term, the structural techniques to consolidate calculations by up to 30 %, investment in efficiencies, and completely management cost really should supply upside as desire recovers.

Additional catalysts like the re certification of the 737 MAX, the potential incremental orders of commercial aircraft plus defense contract awards, don’t stop Eisen’s rating an Outperform (i.e. Buy). The price target of his, at $181, implies a twenty five % upside from current levels. (to be able to watch Eisen’s record, click here)

BA gets reviews which 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 evaluation on TipRanks)