Boeing BA shares moved higher Wednesday after analysts at Goldman Sachs added the planemaker to its 'conviction buy' list, citing solid long-term aircraft demand amid the ongoing surge in global travel.
Goldman Sachs analyst Noah Poponak reiterated his $258 price target on Boeing, the world's second-largest planemaker behind Airbus, but added it to the bank's list of top picks across various industries following a mixed set of third quarter earnings and solid overall deliveries.
Boeing's order book grew by 224 plans, with just 10 cancellations, over the third quarter with sales including 150 737 Max jets to European discount carrier Ryanair as part of a $40 billion commitment announced earlier this year and 50 787 Dreamliners to United Airlines UAL amid a massive bet on the strength of the post-pandemic rebound in global travel.
Looking to the longer term, Ryanair has said it would buy as many as 300 737 Max jets, which carry a list price of around $40 billion if the deal is filled to completion, with deliveries phased between 2027 and 2033.
The group's overall order book now stands at 5,172 planes, the highest since December of 2019, valued at around $58 billion.
"Air travel and aircraft demand remain strong, driven by growth and upgrade needs, and generating several years of backlog for Boeing. This strong demand has also resulted in substantially higher pricing for BA, which should flow to margins in the future,” Goldman said.
The bank added that it's more focused on "medium-term supply vs. demand in the travel market and with commercial aircraft, whereas the stock price has appeared highly focused on near-term delivery trends despite the long-cycle nature of the business”.
Boeing shares were marked 0.96% higher in mid-day Wednesday trading to change hands at $188.64 each, trimming the stock's six-month gain to around 7.25%.
Boeing, which has reported only one profitable quarter over the past three years, said its adjusted core loss for the three months ending in September was pegged at $3.26 per share, narrowing from the $6.18 per share loss it reported over the same period last year but outside the Street consensus forecast of $2.96 per share.
Group revenues, Boeing said, rose 13.4% from last year to $18.1 billion, a tally that narrowly topped analysts' forecasts of an $18.01 billion tally.
Boeing delivered 105 aircraft to customers over the three months ending in September, the company said, including 27 jets in the month of September alone. However, deliveries of is 737 Max aircraft, the popular narrowbody jet, slowed to the lowest levels since August of 2021
Adjusted free cash flow was pegged at -$310 million for the quarter, however, and Boeing reiterated its full-year forecast of a total between $3 billion and $5 billion. It also sees 787 production rising to 5 planes per month by the end of the year.
However, it trimmed its 737 Max delivery target to a full-year tally of between 375 and 400, down from its prior estimate of between 400 and 450, owing an existing defect in the workhorse aircraft. So far this year, Boeing has delivered 286 733 planes, including 70 over the third quarter.
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