Boeing ‘Significant Overhang’ Removed – Goldman Sachs
2022.08.22 17:45
Boeing (BA) ‘Significant Overhang’ Removed – Goldman Sachs
By Sam Boughedda
A Goldman Sachs analyst reiterated a Buy rating and $281 per share price target on Boeing (NYSE:BA) shares Monday.
The analyst released a note to clients after Boeing resumed 787 deliveries after a 15-month pause and nearly two years since the original halt, delivering the first aircraft to American Airlines (NASDAQ:AAL) on August 10 following FAA approval.
“This removes a significant overhang on the stock, unlocks $10bn+ of cash in inventory, and marks the inflection point of a $4bn positive swing in annual free cash flow generation related to the production rate of
the aircraft. This is a major step in Boeing returning to a more normal environment for aircraft production, deliveries, cash generation and balance sheet,” the analyst said.
The analyst added that since 2020, BA has delivered just 8% of the pre-pandemic skyline, cancellations have been just 12% of the starting backlog, and new orders (1% net cancellations).
“We see backlog coverage supporting production recovering to 7/mo by 2025, with inventory unwinding by the end of 2024 on just 8-9 deliveries per month; and all of this supporting better free cash flow,” the analyst wrote. “Given most aircraft are likely in material adjustment clause territory at this stage, we believe the backlog indicates true demand for the aircraft. While orders have been light, there have been more than we would have anticipated, and we would expect that pace to increase following firmer delivery visibility from Boeing and as international travel recovers.”
Boeing shares are down 2.8% in early Monday trading.
