On Monday, Bernstein SocGen Group adjusted its outlook on Boeing shares (NYSE: NYSE:BA), reducing the price target from the previous $230.00 to $215.00, while maintaining an Outperform rating. This adjustment follows Boeing's announcement on May 23, which set reduced expectations for aircraft deliveries and free cash flow.
The revised free cash flow (FCF) estimate for 2024 now stands at -$3.6 billion, attributed to several factors including fewer aircraft deliveries to China, delays in 787 deliveries due to required inspections, and a dimmer performance outlook for the defense sector.
Despite the lowered FCF for 2024, Bernstein SocGen Group forecasts a rebound in 2025, expecting an increase in FCF by $1.2 billion.
The reduction in the price target to $215 reflects the impact of these updated estimates. Despite the near-term financial challenges, there are positive developments for Boeing.
Notably, the company has nearly doubled the delivery of 737MAX aircraft from production, reaching 21 units in May, which supports Boeing's target of 38 deliveries per month by December.
Boeing has also completed a quality plan and submitted it to the Federal Aviation Administration (FAA), which will oversee progress. The company is optimistic that the ongoing work with the FAA will not hinder its delivery ramp-up for the year.
The primary constraint, according to Boeing, is the production bottleneck at Spirit AeroSystems (NYSE:SPR), which is reportedly showing rapid improvement.
Further updates include ongoing negotiations regarding the acquisition of Spirit AeroSystems, with the potential for finalizing a deal within this quarter.
Additionally, certification efforts for the 737MAX-7 and MAX-10, as well as the 777X, are reportedly on track. No new information was provided on the planned CEO transition at Boeing.
InvestingPro Insights
As Boeing (NYSE: BA) navigates through its current financial and operational challenges, insights from InvestingPro provide a deeper understanding of the company's market position and future outlook. With a market capitalization of $109.03 billion, Boeing's fiscal landscape is marked by a negative P/E ratio of -49.84, reflecting investor concerns about current profitability. The company's revenue has grown by 8.37% over the last twelve months as of Q1 2024, indicating some resilience in its core business activities despite the challenges faced.
InvestingPro Tips highlight that Boeing is a prominent player in the Aerospace & Defense industry, but analysts have revised their earnings downwards for the upcoming period, and the company is not expected to be profitable this year. Additionally, Boeing's stock price is known for its volatility, and the company is trading at high EBIT and EBITDA valuation multiples. It's also worth noting that Boeing does not pay a dividend to shareholders, which may influence investment decisions for those seeking income-generating assets.
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