Boeing's Delivery Pace Is Finally Accelerating. Here's the Free-Cash-Flow Math Bulls Love.
The aerospace giant's future prospects are tied to its commercial airplane deliveries.
Overview
Boeing's (NYSE: BA) recent results helped confirm the improvement in its single most important operational metric: airplane deliveries from Boeing Commercial Airplanes (BCA). It's a positive development and helps build the buy case for the stock.
The chart below shows the strength of the relationship between BCA deliveries and the company's free-cash-flow (FCF) generation. This is completely understandable given that the BCA segment is its core business. Moreover, the best way Boeing can grow its profit margins is by ramping up deliveries, as it has a massive fixed cost structure. As more aircraft roll off the production line, the unit cost of each airplane will fall because fixed costs are spread across more aircraft.
Details
If the Wall Street consensus from Visible Alpha is a guide, Boeing's delivery ramp will reach $10 billion in 2028. Given that the company's market cap is only $175 billion, it would be trading at a very attractive valuation.
Source
Originally published at www.fool.com.