I am bullish on Boeing (BA) as it enjoys substantial competitive advantages and its price target implies strong total return potential, while Wall Street analysts are overwhelmingly bullish on it.
Boeing was founded in 1916 by William E. Boeing. At the start, the company focused solely on aero products and was based in Seattle, Washington. He then partnered with Conrad Westervelt to construct the first “B&W” seaplane. In 1917, they renamed the company to Boeing Airplane Company, and by 1928, the company was called Boeing Airplane and Transportation Company.
Initially, the company sold its airplanes only to the U.S. Navy, but slowly started venturing into untapped markets. Now, the company headquarters is located in Chicago, and its business segments include Commercial; Defense, Space & Security; and Global Services.
Boeing’s Strengths
Boeing is perhaps the most significant aerospace company in the world. It has a robust list of clientele that ensures its revenue stays sky-high, and has a stellar research and development team. The company puts a strong emphasis on technology, engineering, and operations.
Its R&D department also contributes heavily to the company’s latest product offerings while helping it retain its position as the market leader.
Recent Results
Boeing reported a third quarter revenue of $15.3 billion in the third quarter. Its loss per share of $0.19 and a core loss per share of $0.60 reflect its higher commercial volume.
The company reported an operating cash flow of $0.3 billion in the third quarter. Its operating cash flow also took a huge hit because of a $1.3 billion tax refund in the same quarter. Additionally, marketable securities decreased to $20 billion (they stood at $21.3 billion at the start of the quarter).
The company’s debt came down to $62.4 billion (this number stood at $63.6 billion at the start of the quarter). At the end of the quarter, the company’s overall backlog was $367 billion.
Valuation Metrics
BA stock looks reasonably priced here, as it trades roughly in line with its historical averages on an enterprise value to EBITDA ratio basis. Its enterprise value to EBITDA ratio is 19.28x compared to its historical average of 18.15x.
Meanwhile, analysts expect revenue to grow by 32.8% in 2022 and EBITDA to grow by a very impressive 119.5% in 2022.
Wall Street’s Take
According to Wall Street analysts, BA earns a Strong Buy analyst consensus based on 13 Buy ratings, four Hold Ratings, and zero Sell ratings in the past three months. Additionally, the average BA price target of $267.33 puts the upside potential at 31.1%.
Summary and Conclusions
Boeing enjoys a wide moat around its business, as a global leader in aeronautics and aviation. It enjoys a lucrative government business as well as significant demand from commercial airlines across the globe.
Additionally, the stock looks opportunistically priced right now, as analysts are overwhelmingly bullish on it here and the average price target implies strong upside over the next year. Additionally, valuation multiples look reasonable even as growth is taking off, as the economy gears up for a full re-opening from COVID-19 restrictions.
As a result, investors might want to consider adding shares while they still appear to be cheap.
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