Clear Skies Ahead for Boeing: Analyst Forecasts Upside as Improved Liquidation of 787 Inventory Looms

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• Credit Suisse analyst Scott Deuschle maintains Boeing Co (NYSE: BA) with a Neutral and raises the price target from $200 to $220.
• The analyst forecasts 1Q sales, segment EBIT, and adjusted EPS below Street estimates.
• Deuschle's below-Street EBIT and EPS forecast reflect lower widebody profitability at BCA and the KC-46 charge at BDS.
• The analyst sees 1Q FCF as an outflow below the Street estimate but still a marked improvement from last year's flow. The liquidation of 787 inventory relative to last year's build is the biggest driver of FCF improvement.
• Beyond the quarter itself, the analyst expects BA to reiterate guidance. Still, on the positive side, the analyst said management likely formalizes timing on the 737 rate break to 38/month alongside the print. Based on press reports, this appears likely to occur this summer.
• The analyst thinks positive news on rates and another potential block extension on 787 likely drive upward revisions to FY24 and FY25 estimates after the print.
• Deuschle writes this revision story makes BA worth owning into results, though the rate break news is likely in the stock to some extent.
• Arguably the better reason to be tactically bullish is to catch the momentum the analyst expects into the Paris Air Show.
• The analyst said improving production and deliveries with an expected strong showing for orders in Paris could enhance investor confidence in BA's path from here. In that context, Deuschle finds themselves tactically positive on the stock, though he continues to find valuation a hurdle.
• The analyst sees the primary near-term headwind for BA shares as the risk that it gets caught in a negative cyclical factor trade, given ISM's underperformance.
• Price Action: BA shares traded lower by 0.57% at $210.26 on the last check Monday.

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