Arment reiterated an Outperform rating on Boeing shares, and raised its price target by over 15 percent to $240.
That significant upside, about 19 percent from Monday’s $202 open, would follow the 30 percent gains already seen this year.
Arment raised his EPS estimate for Q2 from $2.29 to $2.33, bringing it just above consensus’ $2.32.
The company delivered 183 planes this quarter, missing Arment’s estimate by nine. Arment’s model sees EPS affected by $0.01 per 737 delivered, which fell short by 15 planes, but by $0.02 per 777, of which Boeing delivered six more than expected.
The analyst also increased his total 2017 EPS by $0.05 to $9.60. Current guidance is well below at $9.20–9.40.
Free Cash Flow Could Take Off
Arment believes that free cash flow could rise by over $1 per share by 2021, driven by Boeing Global Services.
The growth depends on the segment maintaining at least mid-teens operating margins and the implementation of pricing deals with suppliers set being in 2019.
In the long term, Boeing seeks to maximize revenues by controlling the entire life cycle of BGS, as opposed to just the initial original equipment manufacturing revenue.
“[Boeing] wants complete control over the customer relationship and design process of the product,” said Arment.
The company’s revenue projections for the segment seem unreasonable without acquisitions, noted Arment. But there is the potential for the current revenue base to double by 2025 if industry growth continues in the mid-single digits.
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Latest Ratings for BA
|Mar 2017||Berenberg||Initiates Coverage On||Buy|
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