Free cash flow at commercial aerospace giant
has stabilized. Earnings, however, are all over the place. That isn’t bothering Wall Street, though—the stock remains attractive and target prices are moving higher.
(ticker: BA) reported a loss of $1.75 a share. Wall Street was looking for a 20 cent loss. It was a big miss, but shares finished up 0.3% on the day. Investors are inured to big misses from the company.
Boeing has missed estimates in 12 of the past 15 quarters. Investors may be used to it, but that isn’t typical on Wall Street. Most companies beat earnings estimates. Investors expect some conservatism from companies and the Street when setting guidance and projections.
Still, analysts aren’t too worried about earnings misses either. “We have not quite reached the era of consistently clean prints, wrote Citi analyst Jason Gursky in a Thursday evening research report. “On the positive side, MAX aircraft are flying again in China.” With MAX deliveries starting again in that country, the risk of big earnings misses down the road is lower, according to Gursky.
He increased his price target to $248 a share from $222 after the earnings report. Gursky rates shares Buy. Melius analyst Robert Spingarn rates shares Buy, too. His price target is $224 a share, unchanged after earnings.
He is focused more on the long-term outlook for Boeing. “Although Boeing is still dealing with the macro-driven challenges of Covid and self-inflicted missteps…demand for Boeing’s products remains strong,” wrote Spingarn in a Wednesday report following earnings. “A global duopoly is a powerful thing.” He was referring to
(AIR.France) and Boeing which together dominate the market for commercial jets.
Boeing delivered 480 jets in 2022. That should be closer to 600 in 2023 and keep rising into the 800-per-year range—similar to levels prevailing before the Covid-19 pandemic.
Not everyone is comfortable with the current state of things. BofA securities analyst Ron Epstein was disappointed by Boeing’s profit margins in the current quarter. He would like to see some consistent improvement.
He rates shares Hold and has a $225 price target for the stock. Vertical Research Partners analyst Rob Stallard rates share Hold, too. His price target is $175 a share.
“We’re…not entirely comfortable with Boeing deciding to ignore its own [profit and loss] statement,” wrote Stallard in a Wednesday report. “Focusing on cashflow as it clears its bloated inventory is clearly the aim, but asking investors to simply ignore the P&L is not something that generally makes folks feel comfortable.”
Stallard also pointed out that Boeing’s free cash flow guidance for 2023—$3 billion to $5 billion—is big enough to “drive a truck through.” Boeing doesn’t provide bottom-line guidance anymore. That makes some sense as the company is still working through the twin unprecedented issues of the 737 MAX and Covid-19.
The MAX was grounded worldwide between March 2019 and November 2020 following two deadly crashes inside five months. The MAX has been flying safely for years now, but Boeing still has about 250 undelivered MAX jets to ship to customers.
Airlines haven’t needed all those new jets just yet. Global air traffic at the end of 2022 was running at about 75% of pre-pandemic levels. Things are improving, though.
(GE) CEO Larry Culp told Barron’s this week that global air traffic should get back to 2019 levels at some point in 2022.
GE makes the engines for the MAX, along with many other aerospace products.
The MAX and an improved situation surrounding Covid-19 will be catalysts for Boeing shares in 2023, which is why the Street, overall, is positive—with about 65% of analysts covering the company rating shares Buy. The average Buy-rating ratio for stocks in the
is about 58%.
The average analyst price target has crept up about $20 a share so far in 2023 and sits at about $224.
Coming into Friday trading, Boeing stock is up about 3% for the week and up slightly from levels just before the Wednesday earnings report.
Write to Al Root at firstname.lastname@example.org