Three catalysts are at work to boost Boeing Co.’s stock, analysts at UBS said in their note Tuesday.
With Boeing
BA,
“orders drive deliveries, deliveries drive cash flow, cash flow drives the stock,” the analysts said.
Boeing’s stock has been on a tear since the aerospace and defense company announced a flurry of deals at the Dubai Air Show, the most recent of which from Ethiopian Airlines.
The stock has notched four straight sessions of gains, bringing their month-to-date advance to 10%, which outpaces the S&P 500 index’s
SPX
7% gain.
Boeing booked 176 “firm orders” at the Dubai show, likely to push future short-term orders to “a record-high of 1,400 aircraft, and could result in a meaningful cash deposit,” they said.
Then there’s the scheduled Biden-Xi meeting this week at the Asia-Pacific Economic Cooperation summit, which could include a “positive update” on Boeing’s 737 Max planes, the analysts said.
China has taken no Max deliveries since March 2019, the jet family’s longest freeze, compared to 30% of total Boeing orders pre-COVID, the analysts said.
Boeing in September said 737 Max deliveries guidance for the year would be at the “low end.” The plane has been plagued by manufacturing problems and other issues.
Thirdly, aviation-data-analytics provider Cirium has tracked 32 Boeing deliveries in October, including 18 Max planes compared with 15 Max planes in September.
“Boeing indicated September would look like October, and needs to deliver 89 Maxs in the quarter to reach the low-end of guidance,” the UBS analysts said. Cirium is tracking 9 Max deliveries so far in November.
A step-up is still needed, but Boeing appears to have made progress on the fuselage issue from earlier this year and December tends to be seasonally strong, the analysts said.
“This all supports near and medium term free cash flow, which historically drives the stock,” the analysts said.
Shares of Boeing have gained more than 8% so far this year, compared with an advance of 17% for the S&P.
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