Boeing (NYSE:BA)

There seems to be no respite for Boeing (NYSE:BA) when it comes to the $4.8 billion contract negotiated under former President Donald Trump to develop and modify two 747-8 commercial aircraft to serve as Air Force One. The company incurred an additional loss of $766 million in Q3 over this much-delayed contract, wiping nearly $2 billion from its earnings so far.

The plane maker said that labor shortages and other inefficiencies continue to persist and are responsible for extra losses incurred to modify the two U.S. presidential airplanes. Also, supplier challenges and higher levels of engineering design changes due to technical requirements are pushing costs higher for the company.

Boeing’s Recent Performance: Silver Lining in Sight?

Last week, Boeing reported an adjusted Q3 loss of $6.18 per share, up significantly from a loss of $0.60 in the prior-year quarter. Further, it largely missed analysts’ consensus estimate of $0.13 per share.

Revenue of $16 billion lagged the Street’s estimate of $17.9 billion but compared favorably with $15.3 billion in the same quarter last year. Furthermore, it reported positive free cash flow of $2.91 billion.

Boeing CEO Dave Calhoun said, “We generated strong cash in the quarter and are on a solid path to achieving positive free cash flow for 2022. At the same time, revenue and earnings were significantly impacted by losses on our fixed-price defense development programs.”

The company has been focusing on its commercial sector of late, which was sidelined in the past few years as a repercussion of the pandemic. As a result, Boeing witnessed a 40% jump in Commercial Airplanes division revenue in the third quarter.

At a recent investor conference, Boeing disclosed plans to generate free cash flow between $1.5 billion and $2.0 billion in 2022 and $3 billion – $5 billion in 2023. Notably, it also intends to increase deliveries of 737 MAX and 787 airplanes.

J.P. Morgan analyst Seth Seifman said, “We expect Boeing to emerge from the 737 MAX crisis and begin generating cash in 2022, with the stock being driven by multiple catalysts including the return of the 787, 737 MAX re-certification in China and increased deliveries.”

What is the Prediction for Boeing Stock?

BA stock has a Moderate Buy consensus rating based on 11 Buys, two Holds, and one Sell. The average Boeing stock price target of $190.85 implies an upside potential of 21.75%.

Bottom-Line

Boeing’s efforts to strengthen the Commercial Airplanes unit, along with the resumption of its 787 Dreamliner aircraft deliveries after witnessing several setbacks, bode well for the company’s performance. However, issues related to the Air Force One fixed-price contract, persistent supply-chain challenges, and other macro woes might continue to impact BA stock in the near term.