Boeing Getting Into The Holiday Spirit; Gives The Gift Of Capital Return To Shareholders

On December 12, Boeing Co (NYSE: BA) raised it dividend by 30 percent, which Deutsche Bank’s Myles Walton believes is “a powerful message to those who doubt BA’s ability to continue to grow free cash flow.”

Walton reiterated a Buy rating on the company, with a price target of $175.

Market Concerns

The analyst believes there are several items either Boeing’s management has set forth as targets or the market sees as obstacles to becoming more constructive on the stock.

Among these items are cash flow growth, success in services, meaningful order trends and the development of lower risk products.

While the dividend hike should allay concerns regarding cash flow, Walton stated, “The move of the company in the direction of services is ambitious and while the rate of growth may not reach mgmt’s full target, the formation of an external reporting segment is a welcome and bold move that should have asymmetric benefit to the stock’s multiple.”

Post-Election Impact

Additional items mentioned by the analyst include margin expansion, the post-election impact on the stock and whether the 787 has been able to turn the corner.

“Management’s mid-teens aspirational margin targets are likely a challenge, but the company’s continued productivity actions, improvement on the 787 and volume growth on the 737 do project an investible path toward consistent expansion,” Walton noted.

Regarding the post-election impact, the analyst pointed out that Boeing could be one of the largest beneficiaries of a lower corporate tax environment, as the company transitions to being a full-cash tax payer over the coming years.

Shares of Boeing opened Tuesday trading at $157.22.