Boeing Weakness a Buying Opportunity, Morgan Stanley Says

Boeing’s (BA) stock price soared in 2013, but it’s looked more like Icarus in 2014.

Bloomberg

Shares of Boeing have dropped 5.5% this year after returning 84% in 2013, thanks to an earnings report that painted a picture of a bright past but a murky future.

Morgan Stanley’s John Godyn and team believe Boeing is still worth buying. They explain why:

As most investors are aware, BA has a long history of issuing conservative guidance. On reporting 4Q13, BA's 2014 FCF guidance of ~$3.75B was down meaningfully vs. 2013's $6.1B, a big surprise for most. Mgmt cited several factors when expanding upon its FCF guidance, including favorable timing of receipts and expenditures in 2013, higher cash tax payments specifically related to improved 787 unit cost, fewer 767 deliveries and a one time bonus payment to the IAM that was negotiated in the recent contact extension – though didn't quantify each of these factors except the ~$300M IAM payment. While we recognize these factors as headwinds that were not explicitly in our 2014 forecast, we have trouble reconciling their likely magnitude with the magnitude of the miss. Therefore, we can only conclude there is a large degree of conservatism layered into mgmt's guidance – a theme supported by BA's historical performance…

…we believe valuation is attractive and that post 4Q13 EPS weakness is a buying opportunity.

Shares of Boeing have dropped 0.4% to $128.99 today at 12:56 p.m., while Airbus (EADSY) has gained 1.4% to $18.16 and Embraer (ERJ) has dropped 0.9% to $33.38.