Boeing Analysts Play Catch-Up as Plane Maker Defies Gravity

(Bloomberg) -- Boeing Co. shares are on an unprecedented run and analysts are scrambling to catch up.

Shares of the plane manufacturer are up a staggering 116 percent over the past twelve months, climbing above the average analysts’ price target of about $327 and making Boeing the top performer on the Dow Jones Industrial Average index over the period.

The rally unleashed a wave of price target boosts on Tuesday, with analysts cheering the company’s strong demand, a “very favorable” production outlook and a potential boost to cash flow from a lower tax rate. Cowen & Co. analyst Cai von Rumohr hiked the price target on Boeing by 30 percent to $415, adding that he “can envision a $455 potential valuation on 2019 cash flow.”

Shares of the planemaker are up about 14 percent since the tax overhaul cleared the house on Dec. 20, and since confirming it was in talks for a combination with Embraer SA, the Brazilian jetmaker, on Dec. 21.

Analysts have been sharply revising their expectations since the beginning of the year, with approximately half of the Boeing analysts on the Street boosting price targets, according to data compiled by Bloomberg. In spite of this rate, Boeing’s share price growth still outpaced the increases. Robert W. Baird & Co. Analyst Peter Arment raised his target by 14 percent to $433 and said he expected fourth-quarter results and 2018 outlook to be “solid,” driven by the effect of tax reform. The company is set to report fourth-quarter results on Jan. 31.

Cowen’s Rumohr estimated the new tax law could add about $2 billion to Boeing’s annual cash flow, resulting from the lower rate, bonus depreciation and repayment of deferred 787 taxes at 21 percent versus the prior 35 percent rate. Citigroup analysts also raised their price targets on Tuesday, while Wolfe Research analyst Hunter Keay upgraded Boeing shares to outperform from peer perform.

To contact the reporter on this story: Esha Dey in New York at edey@bloomberg.net.

To contact the editors responsible for this story: Arie Shapira at ashapira3@bloomberg.net, Brad Olesen, Christiana Sciaudone

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