Canaccord Genuity analyst Kenneth Herbert came out with a research note on Boeing Co (NYSE:BA), as the company will be hosting its annual investor day on May 11-12. The analyst is not expecting any major surprises at the investor day, but believes it will generate renewed interest in the stock and the aerospace sector. The analyst maintained a Buy rating on BA shares, with a price target of $165, which represents a potential upside of 13% from where the stock is currently trading.
Herbert wrote, “While we do not expect the investor day to be a major catalyst for the stock, we believe Boeing will benefit as confidence in the cycle holds. On a FCF basis, we see ~$15 in 2018, and at a 15x multiple, discounted back at 10% yields $170, which supports our $165 price target. The price of owning BA stock is quarterly cash flow volatility, but we see upside to the cash flow multiple as execution and the 787 continue to improve.”
“Sentiment on the stock is driven now by the outlook for free cash flow (with the 787 a key swing factor), the health of the commercial aerospace cycle, and the prospects for the 777 and the risk to production schedules as BA looks to bridge the gap to the 777X. For the 787, we believe the deferred production balance will peak in H1/16 at $28.6B. Management is sounding incrementally confident on the 787, and we expect additional color here at the investor day to drive more confidence in the program’s execution.”, the analyst added.
BA shares are still up 9% for the year, as compared to just 1% for the broader market, even though BA shares are 11% off their recent high on February 20.
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Kenneth Herbert has a total average return of 16.0% and a 65.0% success rate. Herbert has a 7.4% average return when recommending BA, and is ranked #306 out of 3596 analysts.