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Argus Research Is Still Bullish on Boeing

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Mar. 8 2019, Published 8:10 a.m. ET

Argus raised target price

Boeing (BA) stock has been rallying since the beginning of this year and has outperformed major US indexes as well as the company’s peers. However, analysts believe that the airplane manufacturer’s upside potential isn’t limited.

On March 7, John Eade, president of Argus Research firm, reiterated his “buy” rating and raised the target price on Boeing to $460 from $420. The revised target price signifies an upside potential of 8.9% from the closing price of $422.56 on March 7. Eade’s target price is also much higher than the consensus target price of $443.75 from Reuters analysts.

The analyst thinks that the ongoing US-China trade war is likely to settle soon and he believes that Boeing and its industrials peers are likely to benefit the most. The trade war settlement would result in a lift in tariffs, which means more US exports to China.

During an aviation summit event in Washington yesterday, Boeing’s chief executive, Dennis Muilenburg, said the possible increased sale of Boeing’s aircraft to China could be a part of negotiations between the US and China to end the ongoing trade war, Reuters reported.

Further, Eade also stated that Boeing’s solid order backlog along with strong footing in the commercial aerospace industry and an aggressive shareholder return policy make it an attractive investment bet.

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Bullish stance

Argus Research isn’t the first investment research firm that has given glowing remarks on Boeing’s growth prospects. Morgan Stanley (MS) and UBS reiterated their “buy” ratings and increased their respective target prices on February 28.

Morgan Stanley raised its target price by $50 to $500, citing a stable commercial aerospace environment, a potential US-China trade resolution, a healthy free cash flow yield, a rate hike for 737 models, and new mid-sized plane launches. UBS upped its target price by $25 to $525 and is optimistic about Boeing’s 777x development program progress.

Before this on February 11, JPMorgan Chase (JPM) raised its target price on Boeing to $450 from $425 due to the improved outlook for its FCF (free cash flow) in 2020.

Boeing stock has gained 31% YTD and significantly outperformed the returns of the Industrial Select Sector SPDR ETF (XLI), which has risen 15.5% during the same period. Lockheed Martin (LMT) and General Dynamics (GD) have grown 15.7% and 5.8%, respectively.

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