Covid, China, the 737 MAX and 787 quality issues – there is a lot of uncertainty about the commercial space giant
nowadays. Those headwinds are keeping one analyst on the sidelines, but there’s a silver lining to patient investors.
Vertical Research Partners analyst Rob Stallard lowered his estimates for delivery, revenue and cash flow, as well as his price target on
(ticker: BA) on Thursday.
“There is still a lot of uncertainty about the outlook for two of Boeing’s critical programs, the 787 and the 737 MAX,” Stallard wrote in a research report. China has still not recertified the MAX for commercial flights, and the Federal Aviation Administration has still not authorized Boeing to restart 787 deliveries.
“Our judgment is that a resolution of the issues with both aircraft moves to the right, and so we need to update our Boeing estimates again,” Stallard added.
For 2022, Stallard’s earnings per share estimate goes to $5.76 from $5.90. His estimate of free cash flow for 2022 is $9.6 billion. Stallard’s price target for Boeing stock was lowered from $250 to $240. He rates Hold stock.
Wall Street expects Boeing earnings of $6.16 per share in 2022, ahead of Stallard’s forecast. But free cash flow estimates are about $8 billion. Boeing’s cash flow will be volatile in the coming years as it supplies many aircraft it has already built from its inventory. When the planes are finally delivered, more money comes in.
Analysts’ average price target is about $273 per share. About 54% of the analysts who cover stock prices buy. The average Buy rating ratio for stocks in the S&P 500 is about 55%.
Boeing stocks aren’t responding much to Stallard’s cuts. Shares rose 0.3% in premarket trading to $217.69.
Dow Jones Industrial Average
futures were both up about 0.4%.
Boeing shares have not fared very well in 2021 so far. It is up about 1%, well below comparable market gains. Over the past three months, stocks have fallen about 10%. Fears that the Delta variant of Covid-19 would hurt travel recovery weighed on investor sentiment.
While Stallard doesn’t like Boeing stock right now, he still sees some potential down the road.
“We still find Boeing’s stock a bit of a mystery,” the analyst added. “While the company clearly faces near-term challenges that the two have 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 spacecraft.”
Commercial aerospace supplies were badly battered by Covid-19 and that problem is slowly disappearing. Stallard lists an entry point for investors around $200 as “not bad.”
Things should get better for Boeing – eventually.
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