Bernstein's Doug Harned Thinks Boeing Stock Is 'Unusually Attractive'

• Boeing Co BA shares are down 7 percent since August 17.
• Bernstein analyst Douglas S. Harned maintained an Outperform rating on the company, with a price target of $196.
• Positive demand outlook and rising cash flows are expected to drive upside in Boeing’s stock, Harned said.

Analyst Douglas S Harned believes that Boeing’s stock is “unusually attractive at this point of time, with upside in the stock most likely to come with rising cash flows after Q3 and Q4 reporting.”

The company’s free cash flows are expected to grow through 2019 as the Boeing 787 turns cash positive. Harned added, “Growth in 787 cash should more than offset the modestly lower production rates we expect on the 777 in 2018-19. Historically, Boeing's share price relative to the S&P500 has been well-correlated with free cash flow.”

In the report Bernstein noted that Boeing’s management has reaffirmed that 787 will be cash positive by the end of 2015. The company is implementing cost reduction measures besides a mix shift to higher priced 787-9s and 787-10s.

Harned said that Boeing is in a strong position with its core commercial programs and expects production rate plans to hold despite any cyclical factors. Strong airline demand is expected to absorb the production plans of both Boeing and Airbus assuming there is no global recession.

“We expect a positive cash deployment approach to continue after the company's Q4:2014 dividend increase and $12 billion share repurchase authorization. Boeing is expected to continue with its share buyback program,” Harned added.