Deutsche Bank analyst Scott Deuschle changed price targets and presented earnings previews for major Aerospace companies such as GE Aerospace (NYSE:GE) and Howmet Aerospace Inc. (NYSE:HWM).
The analyst writes that these stocks are well-insulated against end-market challenges and are likely to achieve the largest earnings beats and drive significant upward revisions.
GE Aerospace: The analyst raised the price target to $235 from $212 while maintaining a Buy rating.
Deuschle expects a 9% EPS beat in their base case and a 15% beat in the blue sky scenario for the third quarter.
In both cases, the analyst anticipates an increase in 2024 guidance, with a potential 7% EBIT rise if the blue sky scenario occurs.
Strong CSA collections from the summer flying season could drive free cash flow (FCF) above expectations, leading to an increase in FCF guidance, adds the analyst.
Overall, Deuschle says that they are optimistic ahead of the earnings release due to the potential for a significant beat and raise this quarter.
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Howmet: The analyst raised the price target to $125 from $106 while maintaining a Buy rating.
The analyst writes that the base case estimates third-quarter EPS at $0.68, above the Street's $0.66, with a roughly 2% midpoint guidance increase.
The analyst cited upside drivers such as pricing strategies, strong execution allowing shipments above long-term agreement caps, and earlier-than-expected generation 2 LEAP HPT blade shipments.
Deuschle expects HWM to guide 2025 revenue in line with the Street (+10%), which could trigger further positive revisions, given a higher 2024 base and likely surprises in Engine Products EBITDA margins.
For Boeing Company (NYSE:BA), the analyst lowered the price target to $195 from $225 while maintaining a Buy rating.
The analyst anticipates a third-quarter free cash flow burn of ($4.0 billion), up from a previous estimate of ($2.4 billion), due to the strike's impact on September deliveries and ongoing cash pressures in Boeing's Defense segment.
The forecast includes a $1 billion EBIT loss at Boeing Defense Systems (BDS) and a $1.6 billion loss at Boeing Commercial Airplanes (BCA), adds the analyst.
Deuschle says that BCA loss forecast assumes a $1 billion forward loss on the 777X, reflecting delays in entry into service and increased costs related to union negotiations and wage hikes.
Also Read: Boeing Workers' Union Says Decision To Cut Health Care For 33,000 Is 'Unnecessary And Cruel'
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