Boeing Co (NYSE:BA) stock rose 2.91% (As on January 12, 12:11:51 AM UTC-4, Source: Google Finance) after Credit Suisse analyst Scott Deuschle upgraded the aircraft manufacturer to ‘neutral’ from ‘sell’, citing the company’s improved operational performance with a $200 per share price target (up from the prior $121). The key driver behind the upgrade is improved operational performance, as evidenced by stronger aircraft deliveries.
The broker no longer sees the opportunity for downward estimate revisions, instead, it is now looking for an upside opportunity.
“We see upside for Q4 FCF (CSe $3.0b vs. Street $2.5b). Additionally, recent strong order activity helps defend out-year estimates and improves overall macro resilience. Finally, China’s lifting of a ban on Australian coal imports may suggest increased policy flexibility, which may suggest higher probability of BA regaining market access,” the analysts said in a client note.
On why not double upgrading BA stock to Outperform, the analysts listed 4 reasons, Valuation, Supply chain risks, Continued risk at BDS (Boeing Defense, Space & Security), and Positioning, which appears increasingly crowded.
Deuschle had a lot of concerns that are now fading. Boeing delivered 152 planes in the fourth quarter, up from 112 delivered in the third quarter. What’s more, the fourth quarter of 2022 was Boeing’s best quarter for commercial jet deliveries since the fourth quarter of 2018 when the company delivered 238 jets. More planes going to customers reduces the risk of earnings misses and raises the odds that Boeing’s free cash flow will improve faster than people expect.
Meanwhile, Operating cash flow of $3.2 billion; continue to expect positive free cash flow for 2022. The company has resumed 787 deliveries and delivered 9 airplanes. The company has recorded losses on fixed-price defense development programs. The company has delivered revenue of $16.0 billion; GAAP loss per share of ($5.49) and core (non-GAAP) loss per share of ($6.18). Total backlog of $381 billion; including over 4,300 commercial airplanes. Cash and investments in marketable securities increased to $14.3 billion, compared to $11.4 billion at the beginning of the quarter, primarily driven by cash from operations. The company has access to credit facilities of $12.0 billion, which remain undrawn.
Moreover, Commercial Airplanes third-quarter revenue increased to $6.3 billion, driven by the resumption of 787 deliveries and higher 737 deliveries. Defense, Space & Security third-quarter revenue decreased to $5.3 billion and third-quarter operating margin decreased to (52.7) percent, primarily due to $2.8 billion of losses on certain fixed-price development programs, driven by higher estimated manufacturing and supply chain costs, as well as technical challenges.