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Analysts Remain Seated Despite Boeing Co's 60% Decline Cash Flow Decline

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Boeing Co's (NYSE: BA) 60 percent decline in third-quarter cash flow put heavy pressure on the company's shares recently, but a number of analysts think the issue will diminish as the company's 787 jetliner project hits breakeven.

Operating cash flow before pension contributions in the recent quarter slipped to $1.7 billion, from $4.31 billion a year earlier, suggesting less cash is available to return to shareholders or invest in new opportunities.

"It's a slip, but not a slide into purgatory," Citibank's Jason Gursky said in a note that blamed investments in the 787 jetliner as well as costs for deferred production in the long-running project.

The company expects to hit breakeven on the 787 project by late next year, but investors are increasingly worried that time frame could get extended, according to Canaccord's Ken Herbert, who cut his target more than 6 percent to $150 but maintained a Buy rating.

Originally planned to enter service in May 2008, the first 787 was delivered in 2011. The wide-body aircraft has seen several subsequent problems, including on-board battery fires as well as fuel leaks.

The entire fleet was grounded by the Federal Aviation Administration for a period in April of last year.

Gursky, who maintained a Buy rating and $146 target, believes Boeing's cash flow growth will accelerate in coming years as the company "comes down the production learning curve and supply chain costs are reduced" for the 787.

A prime selling point for the aircraft, which makes extensive use of composite materials is its fuel economy. Investors worry that a recent 25 percent decline in oil prices could cut demand for the 787.

But Gursky said Boeing managers have assuaged that concern by suggesting a deterioration of demand isn't likely unless Brent oil "fell significantly below $70 on a sustained basis."

Brent is now trading around $86 a barrel.

Boeing changed hands recently at $122.06 per share, up 0.5 percent.

Latest Ratings for BA

DateFirmActionFromTo
Mar 2019ArgusDowngradesBuyHold
Mar 2019ArgusMaintainsBuyBuy
Feb 2019Morgan StanleyMaintainsOverweightOverweight

View More Analyst Ratings for BA
View the Latest Analyst Ratings

Posted-In: Canaccord Citibank Jason Gursky Ken HerbertAnalyst Color Price Target Reiteration Analyst Ratings

 

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