Boeing (BA) stock is off 13.0% year-to-date (YTD) as of April 8 when it closed at $175.20. At the end of 2021 BA stock was at $201.32, hit by a moderate downdraft. However, its airplane deliveries are rising. Moreover, Boeing is also producing positive free cash flow (FCF), so the stock could fly higher again.
Boeing reported its fourth-quarter revenue fell 3% year-over-year (YOY). This was actually over 3% lower than the prior quarter. It got hit by lower defense spending, which is likely to rebound, especially if the Russia-Ukraine war drags on.
More importantly, Boeing reported positive operating cash flow and a return to positive free cash flow (FCF). In Q4 its FCF was positive at $494 million. This compares to a massive outflow (cash burn) of negative $4.27 billion last year. Moreover, Q3 was negative $507 million, so the positive $494 million in Q4 is a harbinger of good things to come.
Moreover, given the general downturn in Omicron, the company should continue receiving orders for the 737 MAX airplane. For example, Air Lease Corp (AL) just added 32 more 737 airplanes to its order book with Boeing. However, Brian West, the CFO, had some cautionary words on the Q4 conference call. He said, "The timing and pace of deliveries to Chinese customers are also critical assumptions to our delivery outlook."
In addition, Reuters reported on March 4, that Boeing planned to nearly double the production of its "cash cow" 737 MAX plane to 47 per month by the end of 2023. However, the latest 737 MAX 10 version is facing certification delays and that could crimp some of its future cash flow. Analysts are still forecast nearly a 30% rise in revenue to $80.73 billion this year, and another 18.5% rise in 2023 to $95.6 billion. In other words, they foresee a rise of over 53.5% in sales over the next two years.
That will likely lead to a significantly higher free cash flow and margins which will push BA stock higher. My estimate is that it could reach $252.86, or over 44% higher than today.
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This is not financial advice and you should not rely on my analysis to buy or sell any stock. I am not undertaking to induce you to buy or sell any securities.
I am relying on the “publisher’s exclusion” in the Investment Advisers Act of 1940 to provide this information without any personalized or individualized investment advice.