On Monday, Jefferies reaffirmed a Buy rating for Boeing (NYSE:BA) with a price target of $270.00. The assessment follows NASA's decision for astronauts Butch Wilmore and Suni Williams to return to Earth on a SpaceX Dragon Capsule in February, after a mission aboard Boeing's Starliner spacecraft on a previous Sunday. The Starliner is set to return to Earth uncrewed due to helium leaks and problems with its thrusters identified during the initial mission.
Boeing was initially contracted by NASA in 2014 for $4.2 billion under the Commercial Crew contract to develop the Starliner spacecraft for transporting astronauts to and from the International Space Station (ISS). The Starliner has faced numerous setbacks, with Boeing recording approximately $1.5 billion in forward losses to date. Despite completing an Uncrewed Orbital Flight test in the second quarter of 2022 and launching a Crewed Flight Test in June 2024, the recent decision for an empty return has necessitated further data collection and system improvements for future flights.
The uncrewed return of Starliner allows for additional testing without incurring unnecessary risk to crew members. NASA's fiscal year 2025 budget still includes funding for Boeing's first crewed non-test flight, CTS-1. However, the implications of the empty spacecraft return are yet to be determined. NASA has expressed the need for two providers in the program but has also had safety disagreements with Boeing regarding the program's return flight.
Boeing faces the challenge of completing its six contracted missions, in contrast to SpaceX's 14, with SpaceX already having completed eight. The financial risk for Boeing includes potential ongoing cost overruns and delays, which could amount to roughly $500 million per year. This is based on an annualized $125 million charge for the second quarter of 2024.
Additionally, Boeing has $238 million in capitalized pre-contract costs and could face $148 million in potential termination liabilities to suppliers. These factors contribute to the projected Boeing Defense, Space & Security (BDS) free cash flow (FCF) outflows of $2 billion in 2024 and $1.4 billion in 2025.
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