By Senad Karaahmetovic
Cowen analyst Cai von Rumohr has reiterated the Top Pick designation on Boeing (NYSE:BA) after strong June 737 deliveries.
The analyst estimates that Boeing managed to deliver 44-48 737s in June, which would be the highest number in a single month since MAX grounding in April, 2019.
“But production likely was stuck in the mid 20's vs. the line rate of 31 due to supply chain issues and BA's decision to pause the line to avoid costly traveled work. This suggests deliveries of completed MAXs from inventory increased, an encouraging trend since they're not subject to supply chain delays,” von Rumohr said in a research note.
The analyst also expects likely improving cash flow in the second quarter and positive news from the upcoming Farnborough Air Show.
“We see Q2 cash outflow of $0.5B vs. Q1's $3.6B deficit, which included $2B+ timing headwind from cash bonuses and BDS advance pull forward. The 737 output shortfall suggests BA may not reach its "near 500" 2022 delivery goal for 737. But encouraging June deliveries & likely 787 delivery restart in H2 augur robust FCF lift in Q3 & Q4, with the year in the black.”
As far as the Department of Transportation’s decision to audit the FAA's oversight of 737 & 787 production, von Rumohr says that is nothing new.
“We'd be surprised if the audit reveals shortcomings,” the analyst concluded.