Boeing (BA): Cowen Sees Hefty Cash Flow Recovery in 2022, Raises Price Target But Expects a 'Messy' Q4 Print

January 18, 2022 6:01 AM EST
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Cowen analyst Can von Rumohr raised the price target on Boeing (NYSE: BA) to $265.00 per share from the prior $250.00 as he expects to see a much more positive year for the embattled giant.

In particular, von Rumohr sees “hefty cash flow recovery” this year, fueled by three key drivers: 1) 737/787 inventory burndown, 2) freighter sales upside, and (3) reduced supplier support.

Cowen forecasts 2022-24 FCF of ~$29 billion, near 2019-21's $30.5 billion outflow.

In the near-term, the analyst expects to see a “messy” Q4 print.

“We see Q4 loss of 36¢ (2¢ > Street). But since this is Brian West’s first full Q as CFO, there's also potential for clean-ups. We est. Q4 cash use of $1.6B vs. Street’s $0.7B as 787/777X inventory ramped and 737’s eased by only an est. 15-20 planes. BA likely won't provide 2022 guide, holding investor focus to mgmt. "color" on ops issues. Most should improve, allowing hefty quarterly EPS ramp and solid FCF snapback this year,” von Rumohr said in a client note.

When it comes to the much-talked subject of 737, the analyst sees China's MAX certification as a key risk removed from the model although the Omicron variant surge continues to hurt the air traffic.

“We’re skeptical of BA's indicated 737 production hike to 31/month in Q1; but deliveries and output should lift, paring BA's inventoried 737's to an est. 190-200 by y/e 2022.”

“BA's large inventory of 737/787’s limits supply chain risk, and generous escalators protect vs. inflation. BCA retained most workers in the downturn, mitigating hiring needs; and labor negotiations aren't a 2022 worry since the IAM contract extends to September 2024. Stringent FAA oversight limiting 737/787 deliveries is the elephant in the room; but it's hard to see this getting worse,” von Rumohr added.

Boeing stock price is down 1.4% in pre-market Tuesday.

By Senad Karaahmetovic | [email protected]

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