Boeing Co (BA): February May Be Slow on Deliveries, But This Analyst Is Not Concerned

Jefferies' analyst Sheila Kahyaoglu chimes in on BA's February orders and deliveries, understanding that February is usually not the company's bright spot.

Though February’s orders and deliveries proved this period was not a standout month for Boeing Co (NYSE:BA), one bull is unfazed, continuing to bet on this industrial player.

Jefferies analyst Sheila Kahyaoglu notes that though the aerospace giant delivered 49 commercial aircraft against 51 this time last year, keep in mind: “February is typically a seasonally slow month.” Therefore, though deliveries are sluggish year-over-year, the analyst is not ruffled by this.

Compared to the first quarter of last year, where deliveries took up a 30% slice of Kahyaoglu’s expectations, this year deliveries landed at 27% of her total first quarter expectations. Kahyaoglu continues to bet that the company can deliver 182 deliveries for the first quarter and 810 for the full year. “In our view, the most incremental item was booking 21 widebody orders in the month, including three legacy 777s,” explains the analyst.

Though stronger 767 and 767 delivery performances came through, the analyst acknowledges this was dragged by a dip for the 777 and the 737 for Boeing- the 737 of which was “timing related.” 737 deliveries took a step back from 36 this time last year to a total of 35. For February, the giant delivered 6 MAX models, which took up 17% of the company’s total 737 deliveries.

The company’s 737 Max deliveries were split from carries ranging from Air Canada (2) to Aeromexico to American Airlines to Aviation Capital Group to TUI Travel.

For 2018, Kahyaoglu projects BA can deliver 266 MAX aircraft, which would mark 45% of a total of 590 737 deliveries. With regards to the 787, BA’s deliveries added up to 11, which is encouragingly a rise from 9 units in February of the year before.

“The 737 MAX should continue to ramp throughout the year,” anticipates Kahyaoglu, who underscores, “Mix was favorable with all shipments of the 787-9 variant. Finally, 777 deliveries totaled one aircraft to Korean Air. We anticipate a delivery rate of approx. 3.5 aircraft per month going forward, in-line with management’s guidance, given the introduction and early production of the 777X into the line. First deliveries of the aircraft are not expected until 2020. Overall, Q1 is a seasonally slow quarter due to the lowest revenue quarter of the year and timing of receipts and expenditures. Boeing expects to generate 15% of full year earnings and 10% of operating cash flow in the first quarter.”

For the month, BA booked 30 gross orders- which includes a positive mix of widebodies, the “most notable” being UPS. For context, UPS ordered 14 B747-8Fs and 4 B767-300Fs. “Boeing also booked three 777Fs from an unidentified customer, which should further fill out the bridge to the 777X. Boeing has a total of 101 B777s on order, which should largely bridge through 2020,” surmises the analyst, who anticipates that the company is looking at over seven years of production in backlog.

Bullish on the company, the analyst reiterates a Buy rating on BA stock with a $400 price target, which implies a close to 21% upside from current levels. (To watch Kahyao’s track record, click here)

TipRanks shines light on the aerospace giant as a stock belonging to the bulls on the Street. Out of 16 analysts polled in the last 3 months, 12 are bullish on BA stock with 4 on the sidelines. With a healthy return potential of 22%, the stock’s consensus target price stands at $402.00.