The Boeing Company (BA)

The Boeing Company (BA) model was updated to account for slightly weaker-than-expected commercial aircraft deliveries and expected changes to 737 build rate increase targets over the next 18-24 months. We now forecast reduced 2H22 earnings potential for 2H22 after applying slightly more conservative BCA segment assumptions. However, the updated CY23-24 estimates remain firmly above consensus. Aircraft delivery projections were essentially pushed to the right due to supply chain factors but underlying demand for next-generation jets does not appear to be waning. Our positive thesis many have been confirmed last week after industry contacts shared some of the details expected to be included in new master production schedules. Continue reading

The Boeing Company (BA) earnings update was generally in-line with expectations and investors seem comfortable with the updated corporate outlook (despite modestly negative 737 program commentary). The portfolio seems to be coming back together after three turbulent years. Going forward, we anticipate a shift in focus to the potential upward bias to medium-term earrings expectations given the: FAA recertification of the 787 aircraft; recovery in aero aftermarket demand (back to pre-COVID levels), slowly improving international airline travel situation (or wide-body delivery outlook) and improving management execution. Continue reading

We are raising the 2Q22 earnings forecast for The Boeing Company (BA) ahead of the quarterly report (scheduled for next Wednesday) following the better-than-expected commercial aircraft delivery report for the month of June. Despite our relatively subdued 2H22 outlook and limited 737 production visibility, we still anticipate a continuation of the positive trading momentum for the rest of the month, following: a successful Farnborough Air Show, expected more upbeat commentary provided by the management team next week, and regulatory approval for the resumption of 787 aircraft deliveries. Continue reading

We lowered Boeing Company (BA) estimates to account for the unexpected negative headline pertaining to a forced 737 assembly line halt in May, confirmation of fewer-than-expected aircraft produced during 1H22, reduced 737 rate increase probability in 2H22, and revised commercial aircraft delivery assumptions. Upon the consideration of the increasingly negative aero channel outlook, on-going geopolitical tensions, and macroeconomic uncertainty, we expect the BA management team to reset/extend the 737-production ramp timeline. Continue reading

We lowered earnings estimates and our twelve-month price target on The Boeing Company (BA) today after discounting expected effects pertaining to a rigorous FAA aircraft certification process, challenging demand environment, diminished supply chain reliability, and incremental balance sheet stress. The updated CY22 EPS outlook accounts for lower commercial jet delivery assumptions, new accounting charges, and reduced liquidity. We also believe there may be another round of negative updates looming for investors to digest this summer . Continue reading

There does not appear to be immediate alloy sourcing risk for The Boeing Company (BA) related to the changing Ukraine situation. While Russian supplier, VSMPO-Avisma, represents a large portion of the annual titanium requirement, our updated analysis suggests BA should be somewhat protected this year given the excess inventory on hand along with domestic melt availability. That said, we proactively lowered the CY22 earnings forecast today to reflect a six-month push out of aircraft delivery recovery assumptions, focusing on a less-certain macro environment, timing on Dreamliner recertification, and supply chain constraints. Continue reading

We updated our Boeing Company (BA) model this morning to account for the relatively cautious near-term outlook provided by the management team and increased 787 program costs. The shares have been under pressure since the issuance of weaker-than-expected 4Q21 earnings results (down 6-7%), which seemingly presents an interesting entry point for new investors given the lack of meaningfully negative catalysts/headlines on the horizon. Continue reading

We are lowering estimates on The Boeing Company (BA) ahead of the 4Q21 earnings release scheduled for Wednesday, January 26, focusing on the downward bias to current BCA segment expectations. Upon final review monthly aircraft delivery reports, the recent commentary provided by airline industry executives, and feedback collected from the aerospace supply channel, we still see near-term earnings shortfall risk over the next 2-3 quarters and expect the executive management team to temper commercial aircraft delivery expectations for CY22 Continue reading

We updated The Boeing Company (BA) model today, reacting to some of the information/thoughts shared by industry contacts following a supplier conference call held late last week. Bottom-line, while the management team formally pushed out 787 aircraft recovery expectations by roughly 6-7 months (as expected), the net-change to the production schedule did not reach worst-case scenario levels that had been speculated by certain company executives. This, combined with a modestly improved 777 program outlooks, resulted in a slight increase to our CY22-23 estimates. Continue reading

We are lowering estimates on The Boeing Company (BA) today to reflect lower commercial aircraft delivery assumptions and BCA margin contraction risk. Based on market intelligence collected from aerospace suppliers over the past few days, we believe there is increasing risk to the current 787 and 737 aircraft delivery/production forecasts, which could come into focus over the next few days. Continue reading

The lack of surprises offered yesterday morning could be characterized as a net-positive for The Boeing Company (BA) as the near-term earnings risk seems to be minimal while the longer-term view seems to be holding, if not improving. Outside of the supply chain risk, headlines should start improving for the company. Continue reading

We lowered estimates to better align with weaker-than-expected aircraft deliveries, increased 787 program cost assumptions, and indirect headwinds tied to COVID-19. As mentioned in a note issued earlier this week, we believe investors should prepare for a kitchen-sink quarter, with management potentially resetting delivery, operating margin, and FCF expectations. In conjunction with an increasingly cautious near-term outlook, we reduced the twelve-month target price to $250/share. Continue reading

We updated The Boeing Company (BA) model to align with expected commercial aircraft deliveries and future production changes. Revised assumptions for the BCA segment resulted in a slightly lower earnings outlook for this year and CY22, with the primary negatives related to the 737 and 787 aircraft programs. Downward adjustments aside, we still believe the BA shares are attractively valued today, especially after completing our EPS upside analysis. Bottom-line, the core portfolio earnings power strengthens considerably (and the FCF generation) if the company can realize those aggressive aircraft production targets embedded in the latest schedules shared with the global supply chain. Continue reading

We are lowering estimates on The Boeing Company (BA) to account for the approaching commercial aircraft segment shortfall. We expect total deliveries to fall about twenty jets below 2Q21 forecasts as another FAA inquiry has resulted in a 787-customer shipment halt, which translates into roughly $0.50/share of near-term earnings dilution in our model. Presumably, consensus expectations will reset following the company issuance of another disappointing monthly aircraft delivery report in early July. Continue reading

We are upgrading the shares of The Boeing Company (BA) to an OUTPERFORM recommendation today, with a twelve-month price target of $275/share, following the early identification of positive trading catalysts expected to develop in the coming months. Notably, our latest aerospace channel checks, which included discussions regarding the latest commercial aircraft production schedules released to all major suppliers, seems to be indicating an upward bias to Street expectations (focusing on CY22 and beyond). Continue reading

A relatively upbeat aerospace market and corporate outlook provided by The Boeing Company (BA) management team, which was confirmed later in the week by Airbus (AIR), indicates the OEMs are nearing a point of stabilization. Assuming the current 737 MAX electrical situation does not become systemic problem, we believe the earnings shortfall risk may be starting to abate. We plan to take a closer look at the industry drivers and company modeling assumptions upon completion of our aero supply channel checks.

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The Boeing Company (BA) reported a 4Q20 EPS loss of $15.25, which fell below forecasts (Tier4: -$1.30; Street: -$1.78) despite better-than-expected revenues of $15.3B (down 15% y/y). However, the company was forced to assume $8.3B of total charges, which included a $6.5M accounting block charge applied to the 777x program. Continue reading

We downgraded the shares of The Boeing Company (BA) to UNDERPERFORM this evening following a thorough review of important macro drivers and the secondary data collected from our aero supplier surveys. Ahead of the company’s 4Q earnings update, scheduled for late-January, we believe BA shares could dip below $200 should the investor focus shift to a muted earnings growth outlook and balance sheet stress. Coincidently, we are also less-bullish on our beloved Cleveland Browns heading into the Sunday playoff game, but we digress… Continue reading

Despite a relatively solid earnings update, which beat our forecast for the first time in four quarters, we are unable to construct a convincing bull-case argument. We ultimately came away with from yesterday’s update with limited earnings and FCF visibility, still digesting the conservatism embedded in management’s commentary. While there were no formal changes made to aircraft build rates, downward adjustments seem almost inevitable against the backdrop of waning demand. Continue reading

The trading catalysts used in the near-term sell rating we had on The Boeing Company (BA) played out as expected, with the red flags detected in surveys turning into the talking points behind a disappointing 2Q20 earnings report and corporate view that is slanting down again. Continue reading

We are downgrading the shares of The Boeing Company (BA) to a SELL recommendation with a revised twelve-month target price of $132 (30% below yesterday’s close), following a final verification of a destabilized aerospace channel environment and rapidly falling contact expectations (looking out two years). Continue reading

We are upgrading the shares of The Boeing Company (BA) to an OUTPERFORM recommendation (versus a sell), expecting the aerospace industry and individual company headlines to be less-negative going forward. The current share price of $120 seemingly discounts all of the main risk(s) associated with a difficult 1H20 customer demand environment and potential 2Q earnings shortfall. Our commercial aerospace channel checks have been pointing south for most of the year, including the subdued contact feedback […]

We are initiating formal coverage on the shares of The Boeing Company (BA) with a SELL recommendation and a twelve-month price target of $120. We expect the stock to trade lower once consensus estimates are reset and aligned with an increasingly negative commercial aircraft production outlook, a sharp pullback in aftermarket sales, and a 1Q18 earnings shortfall. We came away from a bottoms-up look at the company, which included proprietary aerospace supplier survey-work and follow-up analysis, with an incrementally bearish and view of the company and industry. Continue reading