Boeing's cash flow goal faces delay, Wells Fargo downgrades stock

Boeing's cash setback: Boeing's anticipated annual free cash flow target of $10 billion may be postponed by about two years, now expected between 2027 and 2028, according to Wells Fargo. The bank has also downgraded Boeing's stock, citing concerns about the company's financial health.

Following the downgrade, Boeing's shares, a key component of the Dow Jones, plummeted over 7 per cent in after-hours trading, hitting their lowest point in nearly 18 months. Wells Fargo analyst Matthew Akers has revised the stock's target price to $119, reflecting a 32 per cent drop from its previous closing value.

Boeing's debt challenge

Akers highlighted that Boeing's substantial net debt of approximately $45 billion needs to be addressed before the company embarks on the development of a new aircraft. He warned that managing this debt will likely consume the company's cash flow through 2030.

The aerospace giant is still grappling with the aftermath of a January mid-air incident that led to regulatory restrictions on its 737 MAX production, adversely affecting its cash flow. Akers noted that Boeing will need to strengthen its financial position ahead of a potential new aircraft launch in the coming years. He estimated that Boeing might require a $30 billion equity raise to eliminate its net debt by 2027.

Cash flow commitment

In response, Boeing stressed its focus on prudent balance sheet management and liquidity enhancement, referencing comments from CFO Brian West during a July earnings call. The company had previously aimed to reach its $10 billion annual cash flow target by 2025 or 2026.

Akers also projected that Boeing's free cash flow per share could reach around $20 this decade if it delays new aircraft development and focusses on debt reduction. However, this strategy could result in Boeing losing market share to rival Airbus SE in the long term.

So far this year, Boeing's stock has declined by nearly 38.2 per cent.

(With Reuters Inputs)