The commercial aerospace industry is poised for further recovery in 2024, prompting Wall Street to take notice of Boeing stock.
Boeing shares have received a boost with another Buy rating, signaling that the stock could climb an additional 25% in the next year following a strong performance in 2023.
RBC analyst Ken Herbert recently upgraded Boeing stock from Hold to Buy, raising his price target from $200 to $275 per share.
In premarket trading, Boeing stock saw a 1.9% increase, reaching $223.50 per share, while S&P 500 futures dipped 0.1% and Dow Jones Industrial Average futures remained steady. Herbert’s target price represents a significant 25% increase above current levels.
In his upgrade report, Herbert stated, “After another year of supply-chain disruptions and lowered expectations, we believe the set-up into 2024 is favorable.”
The commercial aerospace industry has been grappling with supply-chain challenges since the onset of the Covid-19 pandemic. Boeing has faced additional pressure due to issues encountered by Spirit AeroSystems, a key supplier. To assist Spirit Aero, Boeing restructured certain supply contracts in October.
Herbert further commented, “We expect strong demand to continue for both the commercial and defense business. As production and delivery processes improve, we believe investor confidence in the free cash flow outlook will also strengthen.”
This bullish sentiment from Wall Street experts indicates a positive outlook for Boeing stock as the commercial aerospace industry steadily rebounds.
Boeing’s projected free cash flow
According to projections by Boeing, the company expects to generate significant free cash flow in the coming years. They anticipate $3.5 billion, $5.5 billion, and $8.5 billion in free cash flow for the years 2023, 2024, and 2025, respectively. These numbers are higher than the current Wall Street projections of $3.2 billion, $6.1 billion, and $9.7 billion for the same time periods.
Previous Cash Flow Performance
Boeing had a strong cash flow performance in 2018, generating $13.6 billion. However, this was before the challenges faced by the company due to the pandemic and the global grounding of the 737 MAX jet following two tragic accidents within a short span of five months.
Signs of Recovery
After a long-awaited recovery, it appears that Boeing’s cash flow is gradually improving. The majority of analysts covering Boeing stock agree with this sentiment. According to FactSet, approximately 82% of these analysts rate Boeing shares as a Buy. In comparison, the average Buy-rating ratio for shares in the S&P 500 is around 55%.
Positive Analyst Sentiment
Analyst sentiment towards Boeing has been on an upward trend. In September, about 59% of analysts recommended buying shares in the company. At that time, the average price target was approximately $256. However, the average price target has since decreased to around $246.
Unusual Combination of Buy Ratings and Lower Price Target
Although it may seem unusual to see more Buy ratings accompanied by a lower price target, this can be attributed to the fluctuating stock performance of Boeing. The stock traded above $220 per share in September but fell below $180 per share in October.
Twelve-Month Performance
As of Tuesday trading, Boeing stock has shown a positive trend over the past 12 months, with an increase of approximately 28%.
