The return to service of Boeing’s 737 MAX after a two-year grounding sparked the move. The MAX had been grounded after two of them crashed, in October 2018 and March 2019.
“Our out-year free-cash-flow estimates have moved materially higher,” he wrote in a commentary obtained by TheStreet.com.
“We see advances coming back faster, with 50-plus-per month on the 737 in 2025 coupled with cost actions across the enterprise more than offsetting lower wide-body production (i.e., another 787 rate cut just announced).”
The Chicago aerospace giant’s stock recently traded at $241.15, up 3.6%. It has slumped 26% year to date amid the coronavirus pandemic, but has jumped 67% since Oct. 30 amid excitement about vaccines for the pandemic.
“Our concern on BA’s balance-sheet restoration through greater equity issuance is mitigated at its current higher share price,” Walton said. In any case, “we aren’t modeling in any additional equity raise at this time,” he said.
“Vaccine efficacy of 95% was the catalyzing event for the restart of the aero cycle, and history suggests that when the aero cycle works, so does BA.”
Walton said Boeing’s stock “retains its lowest sell-side rating in a decade and positive catalysts ahead include travel restriction relaxation and MAX certification in China (also wide-body orders in the first quarter of 2021?).”