Boeing Earnings Have Upside: Sterne Agee CRT Sees Buybacks, More Orders Coming

Despite expectations of softer cash flow during 1Q16, Boeing Co (NYSE: BA) has been retiring stock aggressively through its large share buyback initiative.

Peter Arment of Sterne Agee CRT has maintained a Buy rating on the company, with a price target of $196.

1Q16 Expectations

In line with the estimates, the company delivered 176 aircraft in 1Q16, with the 787 deliveries also on track to meeting the estimate of a total of 30 aircraft.

Cash flow is, however, expected to weaken, with consensus expectations for cash from operations for 1Q16 at a loss of $123 million.

Arment expects Boeing to continue with aggressive share buybacks and to reiterate its cash flow guidance for 2016 at $10 billion.

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“We continue to show greater than $7.4 billion in FCF in 2016, $8.5+ billion in 2017, $9.7+ billion in 2018 resulting in $25 billion in FCF during the next three years coupled with a current $11.3 billion in cash on hand,” Arment stated.

Estimates Revised

The analyst expects Boeing Commercial Aircraft to report revenues of $14.5 billion in 1Q16, with operating income of $1.37 billion and operating margin of 9.4 percent.

The 1Q16 and 2016 EPS estimates have been raised by $0.07 to $1.88 and by $0.05 to $8.60, respectively, “reflecting the modest change in aircraft delivery mix and impact from buybacks.”

The deferred 787 production balance is expected to grow by $200 million in 1Q16, sequentially flat and in line with the guidance.