Canaccord Weighs In On Boeing's Dividend, Embraer Deal

Boeing Co BA on Monday announced a 20 percent increase in quarterly dividend to $2.055 per share and replaced its existing share buyback authorization with a new $20 billion authorization, sending a bullish signal on its outlook, according to Canaccord Genuity.

The Analyst

Canaccord Genuity’s Ken Herbert maintains a Hold rating on Boeing with a $360 price target.

The Thesis

Boeing has increased its dividend by 325 percent over the past six years, Herbert said in a note. Since 2014, the company has spent about $38 billion in share buybacks, with the total spend in 2018 alone at $9 billion. Boeing is expected to resume its buyback activity next month, Herbert said.

The latest $20 billion authorization is marginally higher than what investors had expected, and this could lend upside to Boeing’s stock, as the company continues to target returning 100 percent of its free cash flows to shareholders.

Boeing also announced it made progress in finalizing its JV agreement with Embraer SA ERJ and it plans to invest $4.2 billion to acquire 80 percent of the JV, which will include Embraer’s commercial aircraft and services business. The company expects the deal to be closed by end of 2019 and be neutral to its 2020 EPS and accretive thereafter.

“We believe Embraer brings Boeing additional design and manufacturing capabilities, as well as a strong presence in the smaller jet market,” Herbert wrote in the note.