Over the past couple of years, Boeing (NYSE:BA) has faced execution and supply chain challenges that have restricted the speed of FCF improvement. However, could that be about to change? And if so, does it mean it is time to finally get bullish on the A&D giant’s prospects?
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RBC analyst Ken Herbert certainly thinks so, believing we are currently witnessing the initial phases of a noteworthy shift in sentiment towards BA stock.
“After another year of supply chain disruptions and lowered expectations, we believe the set-up into 2024 is favorable,” the 5-star analyst went on to say. “With a strong demand backdrop, we believe investors are positively biased towards Boeing and its exposure to the commercial aerospace cycle.”
Herbert’s confidence in a turnaround for BA is evident as he not only upgraded his rating from Sector Perform (i.e., Neutral) to Outperform (i.e., Buy) but also boosted his price target. Herbert raises the figure from $200 to a joint Street-high of $275, suggesting shares will post growth of ~23% over the one-year timeframe. (To watch Herbert’s track record, click here)
Looking toward next year’s delivery haul, while BA’s production rates would imply a number above 600, anticipating around 100 from inventory and “stabilization at ~38/month for deliveries from production,” Herbert is modeling 535 deliveries of the 737 in 2024, expecting the initial guide for the year will call for deliveries in the range between 500-550.
By the end of 2023, Boeing will be transitioning to a production rate of 38/month for the 737 MAX, with another transition planned to 42/month in 1H24. The major risk remains the supply chain, but here Herbert is confident of “improved supplier consistency into 2024.”
Looking further ahead, for 2025-2026, Boeing maintains its outlook with a production rate exceeding 50 units per month. Notably, Herbert asserts that the company has communicated its intention to suppliers to ramp up production to a rate of 63 units per month by 2026.
While Herbert concedes that for plenty of investors, BA “remains in the penalty box,” he believes sentiment is about to turn positive based on a combination of “improved execution, better than peer FCF growth, and better visibility.”
That’s RBC’s take, what does the rest of the Street think lies in store for BA? Mostly good stuff too. With 15 Buy ratings set against 3 Holds, the stock claims a Strong Buy consensus rating. Going by the $249.67 average target, shares are expected to appreciate by 11.5% over the coming months. (See Boeing stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
