Boeing's Free-Cash Flow And Capital Return Story Flies Below Street's Radar

Baird Equity Research analyst Peter Arment initiated coverage on Boeing Co BA with an Outperform rating and a price target of $161.

“We believe the Free Cash Flow dynamic at BA continues to be underappreciated,” said Arment, who specifically mentioned the generation of $25 billion in FCF in 2017–2019, around $17 billion of which being available for buybacks following dividends.

In the first half of 2016, Boeing bought back $5.5 billion in stock, bringing the total to over 165 million shares since 2013 and representing a 16 percent reduction since 2012. Boeing is expected to raise its dividend in December and expand its share repurchase program, said the analyst.

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The analyst also noted increasing build rates, a seven-year backlog with “record low deferral rates,” stable research and development costs and productivity improvements that contributed to cash returned to shareholders.

At last check, Boeing was slightly up on the day, trading at $134.84, a 0.13 percent increase.

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