CFRA, an independent research provider, has provided MT Newswires with the following research alert. Analysts at CFRA have summarized their opinion as follows:
Our 12-month target of $172, cut $22, reflects a 24x multiple on our 2025 EPS estimate, below BA’s recent historical forward average, on rising regulatory and operational risk. We cut our 2024 EPS estimate by $0.17 to $3.17 and 2025’s by $0.59 to $7.17. Southwest Airlines (LUV 29 ***) said today that it sees 42% fewer deliveries of 737 MAX aircraft from BA in 2024 than originally expected, and, as a result, would be cutting its capacity in 2024. We view this development as an illustration of the difficulty in scaling production and tightening quality control measures at the same time amid heightened regulatory scrutiny. We note that the Department of Justice has also convened a grand jury over the incident on Alaska Air flight 1282. We think BA’s ability to deliver planes, for the near term, is going to suffer. Longer term, BA should still get to benefit from a growing market for new commercial aircrafts, but we think the current FAA-imposed slowdown on 737 deliveries faces a rising risk of running longer.