Analysts at UBS have identified three key catalysts that are set to propel Boeing Co.'s stock to new heights, according to a note released on Tuesday.
Orders Drive Deliveries, Cash Flow Drives the Stock
As the analysts explain, the relationship between orders, deliveries, cash flow, and stock performance is crucial for Boeing. With Boeing's recent flurry of deals at the Dubai Air Show, including a major order from Ethiopian Airlines, the company's stock has experienced a significant surge.
Impressive Performance and Potential Record-High Orders
Boeing's stock has seen consistent gains over the past four sessions, resulting in a month-to-date advance of 10%. This outpaces the S&P 500 index's gain of 7%. The company booked 176 "firm orders" at the Dubai show, which is expected to push future short-term orders to a potential record-high of 1,400 aircraft. This significant achievement could also bring in a substantial cash deposit.
A Positive Boost from the Biden-Xi Meeting
Additionally, this week's scheduled meeting between President Joe Biden and Chinese President Xi Jinping at the Asia-Pacific Economic Cooperation summit could provide a positive update on Boeing's 737 Max planes. China has halted Max deliveries since March 2019, accounting for 30% of total Boeing orders pre-COVID. Thus, any developments in this meeting could have significant implications for Boeing's outlook.
Progress Made and Seasonal Strength Ahead
Furthermore, aviation-data-analytics provider Cirium has reported 32 Boeing deliveries in October, including 18 Max planes. This number surpasses the 15 Max planes delivered in September. Boeing aims to deliver 89 Max planes in the quarter to reach its low-end guidance, with Cirium already tracking nine Max deliveries this November. Although further improvements are still necessary, Boeing has made progress on the fuselage issue from earlier this year. Moreover, historically, December tends to be a seasonally strong period for the company.
Promising Outlook for Boeing's Stock
Taking all these factors into account, UBS analysts anticipate strong near and medium-term free cash flow, which historically drives the stock. Shares of Boeing have already gained more than 8% this year, and with the identified catalysts, the company's stock is expected to experience further growth. Although the S&P has seen a higher advance of 17%, Boeing's impressive performance bodes well for its future prospects.