On Thursday, Wolfe Research maintained its Outperform rating and $220.00 stock price target for Boeing (NYSE:BA). Following a fireside chat at the 17th Annual Wolfe Research Global Transportation and Industrial Conference, it was reported that Boeing's CFO, Brian West, provided updates on the company's financial and operational status.
Boeing now anticipates 2024 to be a year of cash use, revising earlier expectations of a slight cash source. The second quarter (Q2) cash flow is projected to be similar or potentially worse than the first quarter (Q1). Although the second half of the year is expected to show positive cash flow with sequential improvement, it will not be sufficient to compensate for the cash used in the first half.
In terms of aircraft deliveries, Q2 figures for both the 737 and 787 models are likely to mirror those of Q1. The 737 deliveries are currently impacted by China's refusal to accept deliveries due to concerns raised by the Civil Aviation Administration of China (CAAC) over a lithium battery in a cockpit recorder, a component that has been shipped since 2022.
This issue is seen as a matter of timing, and production work on the planes continues with the goal of shutting down the shadow factory by the end of the year. The 787 deliveries are affected by the need to retest all aircraft due to a recently discovered testing issue, compounded by ongoing supply chain challenges.
The Boeing Defense, Space & Security (BDS) division is expected to see a decrease in margins in Q2, stepping back from a strong Q1. This is attributed to additional cost pressures on fixed-price development contracts and the downstream effects of changes at the Puget Sound factory.
Despite these challenges, there is optimism that a deal with the Strategic Petroleum Reserve (SPR) could be finalized within the current quarter.
InvestingPro Insights
As Boeing (NYSE:BA) navigates through its financial and operational challenges, real-time data and insights from InvestingPro can provide investors with a clearer picture of the company's performance.
According to InvestingPro data, Boeing's market capitalization stands at $107.09 billion, and while the company has seen a revenue growth of 8.37% over the last twelve months as of Q1 2024, it is currently trading at a high EBITDA valuation multiple. With a gross profit margin of 11.48%, Boeing is dealing with weak gross profit margins, which may be a concern for investors.
InvestingPro Tips indicate that analysts have revised their earnings downwards for the upcoming period and do not anticipate the company to be profitable this year. Moreover, Boeing is not paying dividends to shareholders, which could affect investor sentiment. Despite being a prominent player in the Aerospace & Defense industry, the stock price movements have been quite volatile, with a 1-month price total return of 10.11% but a year-to-date price total return of -28.54%.
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