Many companies will be eager to put 2020 behind them and surely so will Boeing (BA). The A&D giant had issues to contend with prior to the viral outbreak, but these were exacerbated by COVID-19’s ruinous impact on the airline industry.
Reduced long-term commercial jet demand, aircraft delivery cancellations, terrible earnings and a scathing verdict from Congress for the design mistakes that led to the two deadly crashes of Boeing's grounded jetliner, the 737 Max, have all been on the agenda in 2020.
As a result, BA shares are down by a massive 52% so far this year.
Heading into Wednesday’s Q3 earnings, RBC analyst Michael Eisen is not expecting a surprising turnaround.
In fact, the analyst reduced his consolidated revenue forecast by 18%, due to a 48% cut to his Commercial Airplane estimates; In Q3, BA has already reported it made 28 commercial deliveries vs. Eisen’s prior forecast for 51 aircraft deliveries.
Eisen now expects revenue of $3.3 billion compared to the $6.4 billion he previously forecasted. Street is calling for $4.3 billion.
As far as gaining insights into the overall state of Boeing’s operations, Eisen believes investors will be focused on several key issues, especially “updated expectations on the MAX.”
“This should include comments regarding customers’ willingness to accept the plane, how investors should think about the cadence of production ramps towards 31/month by ’22, and the cash flow profile of the growing MAX inventory,” Eisen said.
Other key areas Eisen expects investors’ to home in on include how Boeing fares compared to other major defense competitors’ lowered 2021 growth expectations. Boeing, says Eisen, should “benefit from ramping development programs and improved production on the KC-46, and should be able to deliver LSD/MSD growth.”
Lastly, investors will be keen to find out Boeing’s cash flow position – “when FCF could inflect positively and what “normalized” cash flows could look like beyond ’21.”
All said, though, Eisen sees better days ahead. The analyst rates BA shares an Outperform (i.e. Buy), along with a $194 price target. The implication for investors? Upside of 25%. (To watch Eisen’s track record, click here)
Amongst Eisen’s colleagues, BA has mixed reviews with a slightly bullish tilt. Based on 8 Buys, 9 Holds and 1 Sell, the stock has a Moderate Buy consensus rating. The average price target hits $188.06 and suggests shares will rise by 21% over the coming months. (See Boeing stock analysis on TipRanks)
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