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How Wall Street Analysts View Boeing after Its 4Q17 Earnings

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Analysts’ recommendations

Boeing (BA) has a consensus rating of ~2.1 with an overall “buy” recommendation. Of 25 analysts covering the stock, eight (32%) have a “strong buy” opinion, and six analysts (24%) have “buy” recommendations. The remaining 11 analysts (44%) recommend a “hold” for Boeing stock. The company doesn’t have any “sell” recommendations from analysts polled by Thomson Reuters.

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Analysts’ target prices

Boeing (BA) has a 12-month consensus price target of $359.50 after the company’s 4Q17 earnings. Based on its January 31, 2018, closing price of $354.40, this represents a return potential of 1.5% over the next one-year period. In the last one-year period, Boeing stock returned a whopping 120.0%. 

Let’s check out the peers’ price target and return potential figures:

  • Northrop Grumman (NOC) has a 12-month price target of $350.20 with a return potential of 2.9%.
  • Raytheon (RTN) has a 12-month price target of $232.30 with a return potential of 11.2%.
  • Lockheed Martin (LMT) has a 12-month price target of $376.70 with a return potential of 6.2%.
  • Textron (TXT) has a 12-month price target of $63.00 with a return potential of 7.4%.
  • Hexcel (HXL) has a 12-month price target of $68.20.
  • General Dynamics (GD) has a 12-month price target of $241.84 with a return potential of 6.3%.

Investors interested in exposure to defense companies can consider the Industrial Select Sector SPDR ETF (XLI). This ETF has a 17.3% weight in major global aerospace and defense companies.

Why analysts seem to be divided on Boeing

On the upside, Boeing’s (BA) cash flows have jumped 30.0% to $13.3 billion due to the effect of the Tax Cuts and Jobs Act in 2017 over its previous year. The company has a strong stock buyback program in place. 

Also, 4Q17 saw the company raise its dividends by 20.0% to $1.71 per share from $1.42 per share. Strong cash flows and relatively high levels of debt resulted in Boeing’s announcement that it would increase its 2018 capex to $2.2 billion from $1.7 billion—an increase of ~30.0%.

On the other hand, the trade dispute between Boeing and Bombardier has favored the latter, as the US International Trade Commission ruled in favor of Bombardier. The Commission rejected Boeing’s claim of suffering injury. 

Boeing alleged that Bombardier sold its C series airplanes below cost in the US market. According to Boeing’s claim, the Bombardier’s C series program received improper launch aid and that these planes were dumped in the US market. This development could impact Boeing’s 737-700 and 737 MAX 7 program.

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