Covid, China, the 737 MAX, and 787 quality issues—there is a lot of uncertainty swirling about commercial aerospace giant
these days. Those headwinds are keeping one analyst on the sidelines, but there is a silver lining for patient investors.
Vertical Research Partners analyst Rob Stallard cut his delivery, earnings, and cash flow estimates as well as his price target on
(ticker: BA) on Thursday.
“There is still a lot of uncertainty around the outlook for two of Boeing’s critical programs, the 787 and the 737 MAX,” wrote Stallard in a research report. China still hasn’t recertified the MAX for commercial flight and the Federal Aviation Administration still hasn’t given Boeing permission to restart 787 deliveries.
“Our judgment is that a resolution of the issues on both these aircraft is moving to the right, and so we need to update our Boeing estimates again,” Stallard added.
For 2022, Stallard’s per-share earnings estimate goes to $5.76 from $5.90. His 2022 free cash flow estimate is $9.6 billion. Stallard’s price target for Boeing stock was cut to $240 from $250. He rates shares Hold.
Wall Street projects 2022 earnings of $6.16 a share for Boeing, above Stallard’s forecast. But free cash flow estimates are about $8 billion. Boeing’s cash flow will be volatile for the next few years as it delivers a lot of planes it has already built from its inventory. When the planes are finally delivered, more cash will come in the door.
The average analyst price target is about $273 a share. About 54% of analysts covering the stock rate shares Buy. The average Buy-rating ratio for stocks in the S&P 500 is about 55%.
Boeing stock isn’t reacting much to Stallard’s cuts. Shares were rising 0.3% in premarket trading to $217.69.
Dow Jones Industrial Average
futures were both up about 0.4%.
Boeing stock hasn’t been doing so great so far in 2021. It has gained about 1%, far below comparable gains of the market. Shares have declined about 10% over the past three months. Fears that the Delta variant of Covid-19 would hurt the travel recovery has weighed on investor sentiment.
While Stallard doesn’t love Boeing stock right now, he still sees some potential down the road.
“We still find Boeing’s stock to be a bit of a conundrum,” added the analyst. “While the company clearly faces near-term challenges, two of which it has little control over, we don’t see them as insurmountable. At the same time, the post-pandemic tide is rising, which should be good for all aerospace boats.”
Commercial aerospace stocks were badly battered by Covid-19 and, slowly, that problem is passing. Stallard calls an entry point for investors around $200 as “not bad.”
Things should get better for Boeing—eventually.
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