Is it time to turn bullish on Boeing (BA)? It seems the past several years have been nothing but turmoil for the A&D colossus – with the company lunging from one crisis to the next, some macro based and some self-inflicted.
Yet ahead of the company’s 4Q21 earnings (Wednesday, Jan 26), Baird analyst Peter Arment sees several reasons to be optimistic.
Based on “highest deliveries in 2021 and a strong year-end order tally,” the analyst thinks the results “should prove to be” the best quarter of 2021.
The analyst expects EPS of $0.02 and FCF of ($1.2) billion vs. the Street’s call for ($0.30) and ($1.2) billion, respectively.
The main items investors will be looking out for include the recovery of 737-MAX deliveries in tandem with 787 production/deliveries.
As for the former, on the China MAX RTS (return to service) and deliveries, the analyst is anticipating “some good news” shortly, with Arment’s checks indicating that test flights have already been taken by three Chinese airline aircrafts. 2022 should see 737-MAX deliveries double to a total of 460, consisting of 205 “classics” and 255 fresh off the production line.
787 deliveries should also kick off again mid-way through Q1, with test flight activity looking “robust.”
Another big issue for investors, concerns the FCF outlook for 2022, which Arment thinks “has a lot of moving parts.” Arment’s model calls for a $3.0 billion “inflow” in 2022, below the Street’s estimate of a touch over $5.0 billion. Looking ahead to 2023 and 2024, Arment expects FCF inflows will rise to $10.0 billion, and $10.3 billion, respectively. As the Street factors in “various inputs such as: aircraft liquidations, OEM rates, pricing discounts, fixed cost absorption, higher supplier input prices and labor costs,” Arment expects the 2022-2024 FCF outlook “will continue to be volatile.”
However, the analyst believes the stock is poised to push higher and tells investors to “add BA on the current market volatility.”
Accordingly, Arment rates BA stock an Outperform (i.e. Buy) and backs it up with a $306 price target. Therefore, he expects the stock to change hands for ~50% premium over the next 12 months. (To watch Arment’s track record, click here)
Most on the Street agree; based on 13 Buys vs. 4 Holds, the stock has a Strong Buy consensus rating. Going by the $267.33 average target, shares will rise by 31% over the one-year timeframe. (See Boeing stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
