Proactive Investors - An influx of orders and other recent developments for aircraft manufacturer Boeing Co (NYSE:BA) that could potentially generate cash flow are set to drive its stock price higher, analysts at UBS believe.
The analysts highlighted Boeing’s booking of 176 orders for its airplanes at the Dubai Airshow, which pushes its last 12 months’ orders to a record high of 1,400 aircraft and could result in a meaningful cash deposit.
“We estimate an order value of around $27 billion (realized prices), which could be $500 million to $1 billion of deposits for Boeing in free cash flow this year,” the analysts wrote in a note to clients.
“This brings Boeing’s backlog to nearly 6,000 aircraft, equivalent to 7.5 years on the company’s 2025/2026 target. That doesn’t include press reports of a potential 50-unit firm MAX order from Riyadh Air, yet to be announced.”
They also noted that a meeting between United States President Joe Biden and Chinese President Xi Jinping this week could result in a positive update on the 737 MAX, with reports of a potential MAX commitment. China has not taken any deliveries of the aircraft since 2019.
“It was reported in August that China deliveries were near, but have yet to resume,” the analysts wrote.
“If Boeing can begin to unwind the 85 aircraft in inventory for China, it would support cash flow and potentially mitigate the need for costly remarketing.”
Additionally, Boeing’s 737 MAX deliveries are tracking higher with the company delivering 18 MAX aircraft during October, up from 15 in September. In November so far, it has delivered nine of the aircraft.
“This all supports near and medium-term free cash flow, which historically drives the stock,” the UBS analysts wrote. “Orders drive deliveries, deliveries drive cash flow, cash flow drives the stock.”
The analysts reiterated their ‘Buy’ rating on Boeing and a $255 price target.
Boeing shares traded up 1.6% at US$207.88 on Tuesday afternoon and have gained 8.6% week-over-week.