Boeing (BA) the stock is down 13.0% year-to-date (YTD) to April 8, when it closed at $175.20. At the end of 2021, BA stock was at $201.32, hit by a moderate downtrend. However, its aircraft deliveries are increasing. Additionally, Boeing is also producing positive free cash flow (FCF), so the stock could rise again.
Boeing announced its fourth quarter revenue fell 3% year-over-year (YOY). This is actually more than 3% less than the previous quarter. It has been hit by falling defense spending, which should rebound, especially if the Russian-Ukrainian war drags on.
More importantly, Boeing reported positive operating cash flow and a return to positive free cash flow (FCF). In the fourth quarter, its FCF was positive at $494 million. This compares to a massive outflow (cash burn) of negative $4.27 billion last year. Also, Q3 was negative $507 million, so the positive $494 million in Q4 is a harbinger of good things to come.
Additionally, given the general slowdown at Omicron, the company should continue to receive orders for the 737 MAX aircraft. For example, Air rental company (AL) just added 32 other 737 aircraft to its backlog with Boeing. However, Brian West, the chief financial officer, issued some caveats about the 4th quarter conference call. He said: “The timing and pace of deliveries to Chinese customers are also key assumptions for our delivery outlook.”
Besides, Reuters reported on March 4, that Boeing planned to nearly double production of its “cash cow” 737 MAX aircraft to 47 per month by the end of 2023. However, the latest version of the 737 MAX 10 is faced with certification delays and that could reduce some of its future cash flow. Analysts still forecast a nearly 30% increase in revenue to $80.73 billion this year, and another 18.5% increase in 2023 to $95.6 billion. In other words, they predict an increase of more than 53.5% in sales over the next two years.
This will likely lead to significantly higher free cash flow and margins, pushing BA shares higher. My estimate is that it could reach $252.86that is more than 44% more than today.
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This is not financial advice and you should not rely on my analysis when buying or selling stocks. I do not undertake to encourage you to buy or sell securities.
I rely on the “editor’s exclusion” of the Investment Advisers Act 1940 to provide this information without any personalized or individualized investment advice.