Bullish On Boeing: Analyst Foresees Robust FCF Generation By Mid-2020s

B of A Securities analyst Ronald J. Epstein upgraded Boeing Company BA to Buy from Hold at an increased price target of $300 from $225. 

The analyst is bullish on improved FCF expectations, with increased delivery rates to drive an incremental annual FCF of $2 billion by 2026. 

The analyst sees FCF generation of $20/share FCF by mid-2020s (vs. prior $15/share).

Epstein notes post-COVID commercial recovery, with passenger demand returning to pre-pandemic levels, leading to an acceleration in domestic and international demand. 

The analyst raised expectations of MAX deliveries to 55/month in 2026 and 60/month by 2027 (vs 50/month beyond 2025). 

Also, the analyst increased the expectations for the 787 delivery rate to 8/month in 2025/26, 9/month in 2027/28, and 10/month by 2029 (vs 7/month beyond 2024).

However, Epstein still expects some execution volatility at BDS, which has struggled to maintain development programs on schedule and faced disruptions on legacy platforms. 

Also, the analyst expects lower profitability from defense to act as a headwind. 

Consequently, the analyst lowered estimates for core EPS to $(1.45) from $(0.70) for 2023 and $4.55 from $4.85 for 2024, mainly reflecting higher-than-expected charges on cash-losing programs and legacy-related challenges.

On the other hand, the analyst raised core EPS estimates to $8.90 (from $7.40) for 2025 and $12.05 (from $8.50) for 2026. 

Other analysts also raised their price target after the company reported better-than-expected Q2 FY23 results yesterday.

The company posted a revenue increase of 18% year-over-year to $19.75 billion, beating the consensus of $16.58 billion. Adjusted loss per share expanded to $(0.82) from $(0.37) in 2Q22, beating the consensus of $(0.84).

At an Overweight rating, Wells Fargo increased the price target to $250 from $237, and JP Morgan upped it to $245 from $225. 

Price Action: BA shares are trading higher by 1.6% at $236.57 on the last check Thursday.