Pro Research: Wall Street eyes Boeing’s flight path amid industry turbulence

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As one of the most scrutinized companies in the aerospace and defense industry, Boeing Co . (NYSE:) has been the subject of various analyses, primarily from Barclays and a notable upgrade from Deutsche Bank. With a market capitalization fluctuating around the $115 to $133 billion mark in the latter part of 2023, Boeing’s performance has been a mixed bag, reflecting both the challenges and potential that lie ahead.

Financial Performance and Stock Ratings

Analysts have consistently given Boeing an “Equal Weight” rating, suggesting that the company’s stock is expected to perform in line with the sector’s average. This cautious optimism is underscored by Deutsche Bank’s recent upgrade to a “Buy” rating, with a price target of $270, highlighting an anticipated positive inflection in Free Cash Flow and an acceleration of aircraft deliveries.

The consensus price target among analysts sits at $210, with Barclays maintaining this figure across multiple analyses. However, Boeing’s stock price has seen fluctuations, dipping as low as $179.09 and recently reaching $220.00 as of November 24, 2023. This volatility indicates a market grappling with Boeing’s current state and future prospects.

Production and Deliveries

A critical concern for Boeing has been the rate of aircraft deliveries, particularly the 787 and MAX models. Deliveries have been sporadic, with some months seeing a cessation, such as in November, where no 787 deliveries were reported. However, the MAX model has shown signs of recovery, with two deliveries in October after 69 in Q3. This trend is a positive sign for Boeing’s operational recovery, suggesting a potential rebound in financial performance.

Financial Forecasts

Looking at the financial forecasts, analysts have projected a negative EPS for FY1, with figures ranging from -3.16 to -5.96, reflecting the financial challenges Boeing currently faces. However, there is an anticipated recovery in FY2, with EPS estimates ranging from 4.49 to 6.09, indicating a potential return to profitability.

Bull Case

Can Boeing’s stock rebound in the near future?

Analysts have identified several factors that could contribute to a rebound. The increase in supplier structural shipments, as evidenced by Dreamlifter arrivals, may signal improving production rates and efficiency. Additionally, the expected profitability in FY2, coupled with the ongoing deliveries of the MAX aircraft, suggests operational progress and demand for Boeing’s products.

Will the recent upgrade by Deutsche Bank drive Boeing’s shares?

Deutsche Bank’s upgrade to a “Buy” rating and a price target of $270 is based on the acceleration of aircraft deliveries and expectations for sustained improvement. This optimism is supported by improved efficiency in the 737 rework process and positive supply chain developments, which may drive Boeing’s shares to outperform in a manner reminiscent of 2017.

Bear Case

What challenges could impede Boeing’s financial recovery?

The negative EPS forecasts for FY1 highlight Boeing’s immediate financial difficulties, potentially stemming from production issues and market conditions. Additionally, the lack of 787 deliveries in recent months raises concerns about the company’s short-term performance and its impact on financial results.

Are Boeing’s operational issues a cause for concern?

The need for more inspection and rework on the 737MAX, as noted by Wolfe Research, may delay deliveries and reset progress. This, coupled with the downward revision of 737 delivery guidance by RBC Capital Markets, signals ongoing production or demand issues that could impede Boeing’s financial recovery.

SWOT Analysis

Strengths:

– Diverse product range in commercial and defense sectors.

– Improved execution and supply chain stability in certain areas.

– Strong demand in aerospace cycle.

Weaknesses:

– Financial challenges indicated by negative EPS in FY1.

– Production and delivery issues, particularly with the 787 model.

Opportunities:

– Anticipated recovery in FY2 with positive EPS forecasts.

– Increased deliveries from inventory and improved 787 program performance.

Threats:

– Ongoing profitability issues within the defense segment.

– Risks associated with re-work and re-marketing of inventoried aircraft.

Analysts Targets

– Barclays Capital Inc.: Equal Weight, $210.00 (November 27, 2023)

– Deutsche Bank: Buy, $270.00 (November 20, 2023)

– RBC Capital Markets: Outperform, $275.00 (November 28, 2023)

– Wolfe Research: Outperform, $260.00 (October 26, 2023)

In conclusion, while Boeing has faced significant headwinds, the company’s stock has been subject to a cautiously optimistic view from Wall Street. With a market presence that spans from October to November 2023, Boeing’s journey ahead is one to watch closely.

InvestingPro Insights

As investors navigate Boeing’s (NYSE:BA) fluctuating market performance, real-time data from InvestingPro offers valuable insights into the company’s financial health and stock valuation. Boeing’s market capitalization stands at a robust $141.94 billion, reflecting its significant presence in the aerospace and defense industry. Despite challenges, the company has shown a notable 23.34% revenue growth over the last twelve months as of Q3 2023, indicating potential for operational rebound.

However, the InvestingPro Tips highlight some concerns. Analysts have revised their earnings downwards for the upcoming period, which may suggest that the market has yet to fully account for potential headwinds. Additionally, Boeing’s stock appears to be in overbought territory according to the Relative Strength Index (RSI), hinting that a price correction could be on the horizon.

For those seeking a deeper dive into Boeing’s prospects, InvestingPro offers a wealth of additional tips. There are 11 more InvestingPro Tips available, providing a comprehensive analysis that can help investors make informed decisions. It’s worth noting that Boeing is not expected to be profitable this year and has not been profitable over the last twelve months, which may temper expectations for immediate financial recovery.

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