Barclays Maintains an 'Overweight' on Boeing (BA); De-Mystifying Company's Cash Flow
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Price: $214.20 -0.42%
Rating Summary:
32 Buy, 12 Hold, 2 Sell
Rating Trend:
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Today's Overall Ratings:
Up: 8 | Down: 5 | New: 26
Rating Summary:
32 Buy, 12 Hold, 2 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 8 | Down: 5 | New: 26
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Barclays maintains an 'Overweight' on Boeing (NYSE: BA) price target of $96.00.
Barclays analyst says, "We see anticipated improvements in cash generation as a substantial pillar of the Boeing investment story, yet we've found cash flow expectations to be wide ranging across the Street with large differences in important key elements. This dispersion, combined with a lack of relative clarity from the Boeing financial disclosures, led us to undertake a more detailed look into the BA cash flows. Given the lack of usefulness of cash flow models that are based on reported earnings (which are distorted by program accounting), we sought to approach an analysis of BA cash flow from a different, more bottom-up oriented angle, which establishes a cash profile for BA's "core" business, then layers on development program impacts and largely non-operating cash effects."
"Our work revealed a relatively stable base of cash flow from Boeing's core
franchises, but revealed nearly $20 billion of "less normal" cash benefits over the last five years, which were needed (along with ~$5 billion in debt, ~$1.5 billion in stock issuance, a sustained cash tax holiday and suspension of share repurchases) to offset ~$18 billion in drag from development programs (or more than $25 billion including R&D). Going forward, development program drags should abate, but so will some of these benefits and new headwinds (primarily pension and cash taxes) will emerge. All in, despite the next five years of cash generation looking very different from the last five, we see room for substantial improvement in cash conversion and FCF per share, to levels perhaps approaching $10 in 2015 (vs. EPS of ~$8)."
For an analyst ratings summary and ratings history on Boeing click here. For more ratings news on Boeing click here.
Shares of Boeing closed at $71.30 yesterday.
Barclays analyst says, "We see anticipated improvements in cash generation as a substantial pillar of the Boeing investment story, yet we've found cash flow expectations to be wide ranging across the Street with large differences in important key elements. This dispersion, combined with a lack of relative clarity from the Boeing financial disclosures, led us to undertake a more detailed look into the BA cash flows. Given the lack of usefulness of cash flow models that are based on reported earnings (which are distorted by program accounting), we sought to approach an analysis of BA cash flow from a different, more bottom-up oriented angle, which establishes a cash profile for BA's "core" business, then layers on development program impacts and largely non-operating cash effects."
"Our work revealed a relatively stable base of cash flow from Boeing's core
franchises, but revealed nearly $20 billion of "less normal" cash benefits over the last five years, which were needed (along with ~$5 billion in debt, ~$1.5 billion in stock issuance, a sustained cash tax holiday and suspension of share repurchases) to offset ~$18 billion in drag from development programs (or more than $25 billion including R&D). Going forward, development program drags should abate, but so will some of these benefits and new headwinds (primarily pension and cash taxes) will emerge. All in, despite the next five years of cash generation looking very different from the last five, we see room for substantial improvement in cash conversion and FCF per share, to levels perhaps approaching $10 in 2015 (vs. EPS of ~$8)."
For an analyst ratings summary and ratings history on Boeing click here. For more ratings news on Boeing click here.
Shares of Boeing closed at $71.30 yesterday.
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