RBC Raises Boeing's Price Target, Says Sharp FCF Inflection On The Horizon

Despite a downturn in production rates, the liquidation of Boeing Co’s BA 737 and 787 aircrafts and the company’s large defense wins should significantly boost free cash flows beyond the first quarter of 2021, according to RBC Capital Markets.

The Boeing Analyst: Michael Eisen maintained an Outperform rating for Boeing, while raising the price target from $164 to $194.

The Boeing Thesis: Boeing’s near-term cash burn is likely to be substantially higher than was previously anticipated, Eisen said in the note.

He added, however, that management discussions with customers give hope that airlines have the ability and willingness to take deliveries of new planes, “with a long list of customers ready to step in to pick up aircraft left unclaimed by cancellations or deferrals.”

See Also: How Does Boeing's Debt Look Like?

Referring to further reduction in the production of 737, 777, and 787 as well as the winding down of the 747 program, the analyst pointed out that these were “largely expected.” He added that Boeing is taking steps to realign and reevaluate how it operates, which has the potential to structurally improve its underlying operations.

Boeing’s inventory has increased to $84 billion due to the surplus of completed 737 aircrafts and a higher number of completed 787s. The liquidation of the completed aircrafts from both programs represents “the key driver for an inflection” in the company’s free cash flows, Eisen said.

BA Price Action: Shares of Boeing were trading around $162.29 at the time of publication.