Boeing's (NYSE:BA) second-quarter preview reveals an optimistic outlook despite recent struggles, according to Jefferies analysts.
"Q2 should hold few surprises," Jefferies notes, citing low expectations for constrained deliveries and significant free cash flow (FCF) usage.
The analysts highlight that the company's path forward is closely tied to improving commercial deliveries and achieving higher production milestones.
Jefferies forecasts a reduction in 2024 MAX deliveries to 350 from the previous estimate of 400, implying a substantial increase in the delivery rate in the second half of the year.
This adjustment impacts Boeing's financial expectations, with 2024 FCF now anticipated to be a $3.6 billion usage, down from the previous estimate of $2.2 billion.
Analysts have also adjusted their 2024 revenue estimates, reflecting a more moderate ramp-up in the second half.
"We cut our 2024 estimates," Jefferies states, pointing to several factors, including a reduced number of 737 MAX deliveries, a significant fine tied to a Department of Justice settlement, and lower revenues for Boeing Defense, Space & Security (BDS) and Boeing Global Services (BGS).
Despite these challenges, Jefferies suggests that Boeing's Q2 top line likely marks a bottom, with total revenues expected to be $17.0 billion, down 14% year-over-year. The full-year revenue estimate of $78.1 billion hinges on a sharp acceleration in second-half deliveries.
Jefferies also highlights potential profit improvements in the second half. For Q2, they expect an EPS loss of $1.51, driven by constrained production and deliveries. However, they anticipate significant improvement in the second half, with a focus on inventory management and moderating advances.
Jefferies maintains a cautiously optimistic view. They acknowledge the heavy dependence on production rates but see the potential for a significant turnaround, underscoring their belief that there is "nowhere to go but up" for Boeing stock.