Boeing Stock Has 45% Upside, According to 1 Wall Street Analyst

The deal to buy Spirit AeroSystems has excited the market, but there’s still a lot of work to do.

Boeing’s (BA -0.51%) deal to buy key supplier Spirit AeroSystems (SPR -0.09%) was warmly received by the market. It pleased a Jefferies analyst who reiterated a buy rating on the stock and a $270 price target, which implies a 45% upside to the current price over the next 12 months or so.

Boeing’s deal removes some uncertainty

As previously noted, shoring up delivery rates by ensuring suppliers like Spirit (fuselages) can meet Boeing’s intended production ramp is one of the three key things Boeing needs to do to put the stock back in recovery mode. The other two, according to the analyst, are to announce a new CEO and ditch the $10 billion in free cash flow in the 2025/2026 target.

The Spirit deal removes uncertainty, and the fact that it’s an “all-stock” deal means Boeing won’t use up precious cash on it. That’s a major plus. The Jefferies analyst sees the deal’s benefits as significant, as it alleviates a situation where Boeing was put under cost pressure by Spirit’s inability to match Boeing’s production rates.

Still, improving production rates at both Boeing and Spirit AeroSystems is easier said than done, and it’s hard to argue that Boeing’s management has covered itself in glory regarding operational matters and quality control. Both aerospace companies’ problems will take time to fix.

A new beginning for Boeing

That said, it’s important not to be churlish and focus on the investment proposition. Boeing has a multi-year backlog, and the Spirit deal does remove some uncertainty. It’s a step in the right direction, and when Boeing does announce a new CEO, the new leadership may get down to readjusting the company’s medium-term guidance while outlining some fresh approaches.

All eyes will be on Boeing’s upcoming second-quarter earnings report later in July, where management will update on expected 737 production rates this year and hopefully outline how it plans to go from about 67 deliveries in the first two quarters apiece to 38 a month by the end of the year and ultimately to 50 a month by the end of 2026.

Lee Samaha has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Jefferies Financial Group. The Motley Fool has a disclosure policy.

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