In a significant move, Bernstein has upgraded Boeing’s (NYSE: BA) shares from Market Perform to Outperform, indicating newfound confidence in the aerospace giant’s potential. The price target has been raised from $181 to $218 as analysts foresee a promising growth trajectory in both Boeing’s commercial and defense sectors.
According to Douglas S. Harned, the lead analyst, “Boeing is undergoing the necessary advancements to follow the growth path we anticipated prior to the unfortunate Alaska airplane doorstop accident in January 2024.” Harned further emphasized that while risks persist, Boeing Commercial Airplanes (BCA) is expected to be on a much firmer footing by 2023, following the FAA’s rigorous scrutiny.
Reflecting investor optimism, Boeing’s shares rose by nearly 2% in pre-market trading on Monday.
The upgrade comes amid signs of stability within Boeing’s commercial operations. Bernstein anticipates the company will achieve a monthly production rate of 38 units of the 737 MAX by July, aligning with management’s guidance. A further increase to 42 units per month could materialize by year-end. Concurrently, the 787 program is poised to expand to seven units monthly in the second half of the year as technical issues are resolved.
While certifications for the 737-7 and 737-10 models remain a concern, Bernstein believes potential delays are unlikely to significantly disrupt the overall delivery schedule.
On the defense front, Boeing’s outlook is also showing improvement. The recent acquisition of the F-47 signifies progress for Boeing Defense, Space & Security (BDS), potentially restoring confidence after years of underperformance and cost overruns. Harned remarked, “Boeing’s F-47 win revitalizes the defense business without incurring fixed-price development risks.” The analyst also highlighted Boeing’s strong position in the potential F/A-XX competition.
Despite existing challenges, such as tariff issues and halted deliveries to China, Bernstein views these hurdles as manageable. Boeing estimates a $400 million impact from tariffs this year, while approximately 50 undelivered aircraft originally destined for Chinese carriers could be reallocated to other customers.
Harned commented, “The halt in deliveries to China is a setback, but these aircraft could be easily remarketed in a worst-case scenario.”
Although Bernstein has lowered its near-term earnings forecasts due to unforeseen BCA costs and tariff pressures, the long-term outlook remains promising. Enhanced free cash flow projections and improved liquidity, bolstered by the planned $10.5 billion sale of Jeppesen, contribute to this positive perspective.
Analysts noted, “The long-term story carries significantly less risk compared to six months ago.”
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