On Thursday, Barclays sustained its Equalweight rating on Boeing (NYSE:BA) with a steady price target of $190.00. The firm's analysis indicates Boeing's announcement of continued cash burn through 2025 is a realistic strategy by CEO Kelly Ortberg, hinting at a potential larger equity raise than previously anticipated. The forecast aligns with the company's projection of a $4 billion free cash flow (FCF) burn in the fourth quarter, followed by an estimated $3-5 billion cash burn in 2025, and $12 billion in maturities due in 2025-2026.
The company's readiness for an equity raise of approximately $20 billion was discussed, with the timing not contingent on the outcome of the International Association of Machinists (IAM) vote. Despite a free cash flow forecast worse than consensus expectations and a probable larger equity offering, the minimal decline in Boeing's stock price suggests investor perception of this update as a moment of clarity.
Barclays emphasizes the potential for the combination of an equity raise and a more realistic FCF trajectory to act as a positive catalyst for Boeing's stock. The firm anticipates the IAM will likely approve the currently negotiated resolution, although it expects a resolution in the near term regardless of the vote's outcome.
Post third-quarter results, Barclays has adjusted its model to account for the anticipated cash burn in the fourth quarter of 2023 and throughout 2025. The updated forecast includes reduced deliveries of the MAX and 787 aircraft for 2025, as well as increased cash burn in the 777X and Defense segments. The firm now projects $13 billion in FCF usage for 2024, $3 billion for 2025, with a return to positive FCF of $4 billion in 2026, $6 billion in 2027, and $8 billion in 2028.
In other recent news, Boeing Co . has been grappling with several significant challenges. The aerospace giant reported a considerable $6 billion loss, largely attributed to an ongoing strike by approximately 33,000 workers who rejected a labor proposal that did not include a defined benefit pension plan. This labor dispute, now extending for more than five weeks, has compounded the strain on Boeing's operations and supply chain, already impacted by production halts of its top-selling 737 MAX jets, as well as its 777 and 767 widebody aircraft.
In addition, during its recent quarterly earnings call, Boeing revealed a slight revenue decline to $17.8 billion and a core loss per share of $10.44. Despite these challenges, the company emphasized its robust backlog and the dedication of its workforce. Boeing's Defense, Space & Security unit, which has faced setbacks including cost overruns and a $2 billion loss from upgrading two Air Force One aircraft, remains central to the company's strategy, as voiced by CEO Kelly Ortberg.
InvestingPro Insights
Recent InvestingPro data provides additional context to Boeing's financial situation, aligning with Barclays' analysis. The company's market capitalization stands at $97.03 billion, reflecting its significant presence in the aerospace industry despite current challenges. However, Boeing's financial metrics paint a concerning picture, with a negative P/E ratio of -14.48 over the last twelve months as of Q3 2024, indicating ongoing profitability issues.
InvestingPro Tips highlight that Boeing "may have trouble making interest payments on debt," which corresponds with the article's mention of substantial cash burn and upcoming maturities. Additionally, the tip that "18 analysts have revised their earnings downwards for the upcoming period" supports Barclays' adjusted model and reduced delivery expectations.
The company's gross profit margin of 5.21% for the last twelve months ending Q3 2024 is notably low, supporting another InvestingPro Tip that Boeing "suffers from weak gross profit margins." This financial strain underscores the potential necessity of the equity raise discussed in the article.
For investors seeking a more comprehensive analysis, InvestingPro offers 8 additional tips that could provide further insights into Boeing's financial health and market position.
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