On Thursday, an analyst from Jefferies revised the stock price target for Boeing (NYSE: NYSE:BA), bringing it down to $270 from the previous $300, while still holding a Buy rating on the stock. The adjustment follows Boeing's recent closure of a new $10 billion debt offering.
The offering, which matures in 2042, carries an average interest rate of 6.6%, subsequently increasing Boeing's annual interest expense by $660 million. This additional cost is expected to impact earnings per share (EPS), with a projected decrease of $0.60 in 2024 and $0.90 in 2025.
The new debt is anticipated to provide Boeing with significant operational flexibility in the near term, including the potential acquisition of SPR. However, the financial maneuver has led to a downward revision of the company's free cash flow (FCF) estimates. The analyst now expects Boeing's FCF to be $1.2 billion in 2024 and $5.3 billion in 2025, a decrease from the previously estimated $1.6 billion and $5.8 billion, respectively.
Boeing's net debt (ND) to EBITDA (earnings before interest, taxes, depreciation, and amortization) ratio is projected to end 2024 at 7.9 times, based on deflated EBITDA. This ratio is expected to decrease significantly to 2.0 times by the end of 2026, following an anticipated $12.6 billion debt paydown over the period.
The company's recent financial activities, including the substantial debt offering, are part of Boeing's broader strategy to strengthen its balance sheet and ensure operational stability as it navigates the current market environment. Despite the reduced price target, the maintained Buy rating indicates a continued positive outlook on the company's stock by the analyst at Jefferies.
InvestingPro Insights
Recent data from InvestingPro paints a nuanced picture of Boeing's financial standing. With a market capitalization of $108.84 billion, the company is a significant player in the Aerospace & Defense industry. Yet, Boeing's P/E ratio stands at a negative -50.08, reflecting the challenges it faces. The company's revenue over the last twelve months as of Q1 2024 is reported at $76.44 billion, with a growth rate of 8.37%, indicating some resilience in their operations.
InvestingPro Tips highlight that Boeing is not expected to be profitable this year, which aligns with the analyst's concerns about the company's increased interest expenses and revised EPS. Additionally, Boeing's stock price has shown considerable volatility, with a 3-month total price return of -18.11%. This volatility is a critical factor for investors to consider, especially in light of the company's recent debt offering and the impact on its financial projections.
For investors seeking a deeper analysis, there are additional InvestingPro Tips available at https://www.investing.com/pro/BA, which could provide further insight into Boeing's financial health and stock performance. Use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking more valuable tips to inform your investment decisions.
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