«Boeing is starting to meet expectations»: analyst advised to buy the company's shares

Analyst of Rothschild & Co. Redburn improved the rating of Boeing shares, advising to buy them, and expects growth of quotations by more than a third. He believes that after a multi-year crisis, which manifested itself in a number of disasters and minor accidents, the aircraft maker is able to accelerate production and restore its market position.

Rothschild & Co. analyst Olivier Brochet. Redburn's Olivier Brochet upgraded Boeing from neutral to a «buy» recommendation, and raised the target price from $199 immediately to $275, wrote MarketWatch. The new target is nearly 36% above the closing price on June 26.

After years of problems, the company's efforts to restore confidence in its liners are starting to bear fruit and «meet expectations,» the analyst wrote. 

«Boeing's situation appears to be unfolding in a more positive direction and the company looks healthier. Improved financial performance, corporate culture, manufacturing processes and strategy, coupled with accelerating airplane production, should allow for a reassessment of the stock in the market. Our confidence in the recovery has strengthened in recent months and we see upside potential relative to current forecasts that exceeds any possible downside risks,» Brochet said.

The big question is whether Boeing can ramp up production to meet sustained demand for its airliners, wrote Barron's. Brochet believes yes: a key source of cash flow will be production of the 737 and 787 models, but it must go hand in hand with improved safety and accountability, the analyst warned. 

Boeing has been gradually losing its focus on safety, but it has already brought back some of the outsourced work, agreed on the necessary metrics with the subject regulator and is no longer focused on «maximizing short-term financial gain at any cost,» Brosche pointed out.

In his view, the company is now better prepared to ramp up production. It has hundreds of fuselages and engines in its inventory that could be used in new 737s. He is also optimistic about the prospects for 787 production and a possible return to steady growth in the defense business, which has seen volatile revenues in recent years;

The analyst forecast Boeing-737 deliveries at 63 airliners a month and 787s at 14. That could add $1.7 billion in net income to the company compared with the current model, and boost its free cash flow to more than $14 billion by 2029 - 13% more than currently expected. By providing sufficient cash flow, the aircraft maker will be able to simultaneously invest in the business and return cash to shareholders, Brosche predicts. The company suspended dividends in 2020.

Shares of Boeing jumped almost 4% in trading on June 27. This year, the company's quotations have grown by 19%, and even in June, which was a difficult month for it, managed to stay in the plus by 1.5%.

Of the 31 analysts who track Boeing securities, 21 (Buy and Overweight ratings) advise buying them. Nine recommendations suggest holding the stock in the portfolio, and only one - selling;

On June 12, a Boeing-built Dreamliner crashed in India for the first time, with the crash killing most of those on board. The tragedy casts doubt on CEO Kelly Ortberg's efforts to restore confidence in the company and speed up production after two fatal 737 Max crashes in 2018 and 2019, wrote the FT at the time. 

According to data Bloomberg, the plane was produced shortly after the launch of the 787 program, when Boeing faced the fallout from a decision to outsource much of its design and engineering work to third-party contractors - in an effort to cut costs. The Dreamliner that crashed had a factory number of 26 - meaning it was among the first 60 airplanes that were subsequently heavily modified after leaving the factory, the agency said.

The causes of the crash have not yet been determined, investigators have downloaded data from the flight recorders and are studying them, reports Reuters, citing India's civil aviation ministry. As wrote The Wall Street Journal on June 18, citing sources, the Dreamliner had an emergency generator running at the time of the crash.

This article was AI-translated and verified by a human editor