Outperform - Price $341.92 on July 9
We are previewing second-quarter 2018 results for Boeing that are due on July 25. As reflected here, we are expecting a solid report showing favorable aircraft deliveries in second-quarter 2018, and we remain comfortable about both short- and long-term investors being long in the shares up to and into the print. We continue to see Boeing on the path to a price well over $400, reflecting robust free-cash-flow generation. We also expect management to reiterate the 2018 delivery outlook and confirm its workhorse 737-MAX delivery target, despite recent headlines about supply-chain pressures.
Our second-quarter 2018 earnings-per-share estimate has been revised higher by three cents, to $3.50, reflecting higher 737 aircraft deliveries than previously estimated. We still expect the current consensus estimate at $3.45 to remain relatively stable into the print. For Boeing Commercial Aircraft (or BCA, which produces commercial airliners and business jets), our assumptions for second-quarter 2018 are revenues of $14.7 billion, operating income of $1.65 billion, and an operating margin of 11.2%. We estimate the 787 deferred-production balance to decline by some $817 million, to $23.87 billion.
Boeing is trading at 2018 and 2019 estimated FCF multiples of 15 times and 13.5 times, respectively. Our price target of $450 is based on 18 times our 2019 FCF estimate.