Boeing shares slip after Wells Fargo downgrades rating of planemaker

Investing.com -- Boeing had an opportunity to post "generational" free cash flow during the current decade, but the figure will likely be capped in a "few years," according to analysts at Wells Fargo.

In a note to clients on Tuesday, the Wells Fargo analysts downgraded their rating of Boeing (NYSE:BA ) to "underweight" from "equal weight" and slashed their share price target to $119 from $185, citing projections that the planemaker's free cash flow per share will peak by 2027 as aircraft development costs offset any potential upcoming output growth.

Shares in Boeing fell sharply in early US trading.

"We think [Boeing] had a generational free cash flow opportunity this decade, driven by ramping production on mature aircraft and low investment need. But after extensive delays and added cost, we now see growing production cash flow running into a new aircraft investment cycle, capping free cash flow a few years out," the analysts wrote.

They added that an equity raise fueled in part by the company's need to "clean up its balance sheet" and fund a new jet production program "[is] likely to further [dilute] shares."

Boeing has vowed to lift production by the end of 2024 despite weathering snags in its supply chain and assembly line following a dangerous mid-air blowout on one of its 737 Max 9 jets earlier this year. In July, Boeing delivered 43 commercial aircraft, in line with the same month a year ago.

Meanwhile, the Wells Fargo analysts flagged that Boeing also faces headwinds from upcoming union negotiations, the planned integration of airline supplier Spirit AeroSystems (NYSE:SPR ), and "softening airline yields" that could "impact orders."

Source: Investing.com