Analyst Bullish On Boeing: 2024 Outlook Promises Recovery Amid Supply Chain Woes

RBC Capital Markets upgraded Boeing Company BA, noting the early stages of a significant shift in sentiment on the stock.

Analysts Ken Herbert and Stephen Strackhouse say that after another year of supply chain disruptions and lowered expectations, the set-up into 2024 is favorable.

Given the robust demand scenario, RBC perceives investors to favor Boeing owing to its involvement in the commercial aerospace sector. Nevertheless, hindrances in execution and supply chain operations have curtailed the speed of Free Cash Flow (FCF) enhancement. 

The shortfall in meeting the anticipated performance for 2022 and 2023 has restrained the stock's growth. 

Nonetheless, the buy-side projections for 2024-2025 FCF display a cautious approach as Boeing progressively enhances its execution concerning the MAX and 787.

RBC upgraded Boeing from Sector Perform to Outperform, with a higher target price of $275 from $200. 

RBC analyst estimates ~380 737 deliveries in 2023, in line with the most recent 375-400 guidance and models 535 737 deliveries for 2024.

The analyst notes that the production rates from Boeing would suggest a number over 600, but they expect ~100 from inventory and stabilization at ~38/month for deliveries from production.

According to the analyst's cash flow analysis for 2023, the 737 MAX is expected to contribute an additional estimated $2.8 billion to the 2025 free cash flow. Following that, the 787 is expected to contribute approximately $1.7 billion. However, it's important to note that within the commercial portfolio, there are lingering uncertainties related to the 777X, particularly concerning the associated risks and the schedule for its entry into service.

Price Action: BA shares are up 1.48% at $222.54 on the last check Tuesday.