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Vivek Kumar
Boeing Manufacturing Facility and Logo
Boeing Manufacturing Facility and Logo

Boeing, the world’s largest aerospace company, reported a loss for the fourth consecutive time in the third quarter as the slowdown in air travel demand due to the COVID-19 pandemic and grounding of 737 MAX hammered aircraft sales.

The U.S. planemaker’s third-quarter revenue plunged 29% to $14.1 billion, GAAP loss per share of $0.79 and core loss per share non-GAAP of $1.39, reflecting lower commercial deliveries and services volume primarily due to COVID-19. That was better than the market expectations of a loss of $2.52 per share on $13.90 billion in revenue.

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Boeing recorded operating cash flow of $4.8 billion.

Earlier this month, the global aerospace company slashed its rolling 20-year forecast for airplane demand and said that the commercial aviation and services markets will continue to face significant challenges due to the COVID-19 pandemic, while global defence and government services markets remain more stable, sending its shares down about 7% on Tuesday.

The Boeing Market Outlook forecasts a total market value of $8.5 trillion over the next decade including demand for aerospace products and services. The forecast is down from $8.7 trillion a year ago due to the impact of the COVID-19 pandemic.

Boeing share fell about 1% to $153.8 in pre-market trading on Wednesday; the stock is down over 50% so far this year.

Executive Comments

“The global pandemic continued to add pressure to our business this quarter, and we’re aligning to this new reality by closely managing our liquidity and transforming our enterprise to be sharper, more resilient and more sustainable for the long term,” said Boeing President and Chief Executive Officer Dave Calhoun.

“Our diverse portfolio, including our government services, defence and space programs, continues to provide some stability for us as we adapt and rebuild for the other side of the pandemic.”

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Boeing Stock Price Forecast

Eighteen equity analysts forecast the average price in 12 months at $188.06 with a high forecast of $260.00 and a low forecast of $147.00. The average price target represents a 21.14% increase from the last price of $155.24. From those 18 analysts, eight rated “Buy”, nine rated “Hold” and one rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $181 with a high of $238 under a bull-case scenario and $68 under the worst-case scenario. The firm currently has an “underweight” rating on the aircraft producer’s stock. The Boeing has been assigned a $225.00 target price. The firm currently has a “buy” rating on the aircraft producer’s stock.

Several other analysts have also recently commented on the stock. Jefferies Financial Group reissued a “buy” rating and issued a $270 target price in August. Wolfe Research raised to a “peer perform” rating from an “underperform” in Sept. Sanford C. Bernstein downgraded to a “market perform” rating from an “outperform” rating and set a $165 price target.

Analyst Comments

“We view Boeing as a relative Underweight as we see better opportunities in the aftermarket. We view Boeing’s order book to be more at risk post-COVID than consensus based on our analysis. The main reasons are: 1) A vaccine will not fix airline’s ability to take deliveries overnight; 2) the 737 MAX delay trigger cancellation rights; and 3) the potential for additional 737 MAX delays is still outstanding,” said Kristine Liwag, equity analysts at Morgan Stanley.

“Based on our bottom-up MS Aerospace Retirement Analysis, we estimate there is $73bn downside risk to Boeing’s revenue in 2020-2025. If air traffic does not quickly recover back to 2019 levels and airlines don’t regain pre-COVID-19 profitability, there are significant risks of cancellations,” Liwag added.

Upside and Downside Risks

Upside: 1) 737 MAX successful re-entry into service converts inventory into cash. 2) Acceleration of aircraft retirements boost new aircraft demand. 3) Profitable customer airlines order new aircraft – highlighted by Morgan Stanley.

Downside: 1) Potential additional 737 MAX delays create additional downside risk to program. 2) Delayed aircraft retirements lower new aircraft demand. 3) Distressed customers’ financials trigger order cancellations.

Check out FX Empire’s earnings calendar

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