'Buy Now': Boeing (BA) Stock Gains as Bernstein Names it Top Choice for 2022, Sees Several Near-Term Catalysts

January 18, 2022 10:12 AM EST
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Price: $122.06 +2.23%

Rating Summary:
    23 Buy, 11 Hold, 4 Sell

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    Up: 10 | Down: 13 | New: 20
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Bernstein analyst Douglas Harned named Boeing (NYSE: BA) a top pick for 2022 as he sees double recovery ahead.

“We describe bear arguments related to Boeing on China, management issues, the 737MAX position, and carbon. We had many of those concerns, as evident by our Underperform rating on Boeing in early 2021. We now see those offset by the MAX and 787 potential. The time to buy Boeing is now, because market and company-specific catalysts are coming in Q1 and Q2,” Harned said in a client note.

The analyst is urging investors to buy Boeing shares now ahead of several near-term catalysts that could drive shares higher.

“First, we believe we are finally headed to a recovery in the broader commercial aerospace market. Most major markets are now well-vaccinated, including Asia-Pacific (ex-China), which was almost totally unvaccinated in Q3 2021. Most markets, ex-China, began relaxing border restrictions, as it became clear zero-tolerance strategies would not work. We saw temporary changes around Omicron, but expect those to relax during Q1. This sets up for a spring ramp in travel and deliveries from Boeing and Airbus, with replacement for fleet renewal a key part.”

Moreover, the analyst also notes that Boeing is past the worst as China’s 737 Max recertification could happen in Q1, paving the way for deliveries by Q2.

“This should also enable Boeing to take production up as planned. We expect a 787 delivery restart in Q2, although there remain risks on timing. Delivery of stored airplanes can release roughly $10 bn in cash for each program over time,” Harned added.

All these factors should help boost free cash flow yields, which are expected to go to 9-10% in 2023-205.

We forecast free cash flow yields moving to 9-10% in 2023-25.

Boeing stock is up 1.3% today to trade at $229.01.

By Senad Karaahmetovic | [email protected]

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Sanford C. Bernstein, Senad Karaahmetovic