Boeing Sees Solid June Deliveries, Boosting Confidence in Production Recovery - Analysts Optimistic

Susquehanna analyst Charles P. Minervino reiterated a Positive rating on Boeing Co BA with a price target of $260.

Boeing announced strong June 2023 aircraft deliveries of 60, bringing the total 2Q23 deliveries to 136. 

737 June deliveries of 49 (48 MAX planes) bring the total 2Q23 total to 103 (100 MAX planes), signaling substantial rebound progress from the MAX vertical attachment defect first announced in April. 787 June deliveries of six bring the 2Q23 total to 20. 

The slight sequential M/M 787 deliveries decline (down from eight 787s delivered in May) comes as no surprise, as BA reworks the 787 horizontal stabilizer defect. 

Even so, with June's still-solid 787 deliveries (along with strong 737 deliveries), the analyst is reassured that Boeing will continue effectively navigating near-term production hiccups.

The analyst updated his 2Q delivery estimates and slightly raised 2Q Commercial Airplanes segment margins concurrent with the newly released June data. 

In light of this updated information, Minervino also slightly adjusted delivery and margin expectations in 2H23. The analyst's EPS estimates remain the same, including his 2Q23/FY23 estimates of $(0.92)/$(1.02). 

RBC Capital analyst Ken Herbert had a Sector Perform rating with a price target of $220.

The analyst is encouraged by the results, as the company delivered 216 737s, comfortably ahead of the 180 it was guided to in 1H23 and on pace to deliver 400-450 for the entire year. 

Herbert believes investors expected substantial delivery numbers in June, as their focus will shift to a potential increase in the whole year MAX delivery guidance. 

Near-term sentiment on the stock is limited by continued headwinds in the defense business (similar to 2Q23 results as to 1Q23), but execution on the 737 program is trending better than expected.

The analyst believes Boeing is ahead of schedule about their complete year delivery guidance on the 737 and 787 programs for 400-450 and 70-80 planes, respectively. 

With 216 737s and 31 787s delivered this year, the company needs to average ~35/month on the 737 and ~7/month on the 787 to meet their guidance. 

Historically, the fourth quarter accounts for ~30% of total annual deliveries, suggesting the 35/month and 7/month targets are both increasingly achievable. 

However, continued supply chain disruptions and aircraft re-work could limit Boeing's ability to raise its delivery outlook. 

With the recent 737 aft fuselage rework and the prior discovery of a nonconforming condition on the 787's horizontal stabilizer, the company faces continued MAX and 787 timing uncertainty. 

The analyst says material lead times and labor headwinds will likely continue to be gating factors for the supply chain, especially for the tier 2/3 suppliers. 

The analyst wrote that Boeing's production rate plan is ambitious, given the current state of the supply chain and the varying rates that suppliers are producing. Still, the company benefits from its inventory position on the 737 and 787 programs.

For 1H23, Airbus SE EADSF leads the duopoly with 1,080 orders and 316 deliveries, while Boeing has posted 527 orders and 266 deliveries.

Morgan Stanley analyst Kristine Liwag reiterated Boeing with an Equal-Weight and a $220 price target.

Price Action: BA shares traded lower by 0.43% at $217.83 on the last check Wednesday.

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