Boeing stock rises as UBS reiterates Buy rating amid next-gen aircraft development

Investing.com - Boeing (NYSE:BA) stock rose Wednesday after UBS reiterated its Buy rating and $280.00 price target on the aerospace manufacturer. The stock, currently trading at $215.83, has shown strong momentum with a 28% gain over the past six months. According to InvestingPro data, Boeing remains one of the most prominent players in the Aerospace & Defense industry, with a market capitalization of $163.2 billion.

The Wall Street Journal reported that Boeing has begun early development work on a next-generation single-aisle aircraft to eventually replace the 737 MAX, exploring new engine concepts, flight-deck design, and advanced materials. This strategic initiative comes as InvestingPro analysis shows Boeing operating with moderate debt levels while facing profitability challenges in recent quarters.

UBS noted this development aligns with Boeing’s previous messaging about an announcement around 2030 and entry into service in the late 2030s, with the firm already modeling a more than 50% increase in R&D and capital expenditure investment from 2024 to 2029 to support this initiative.

The investment bank estimates cumulative investment of $55 billion between 2027 and 2035, assuming flat investment from 2029 to 2035 and completion of MAX-7/10 and 777X programs by 2027.

UBS believes Boeing can absorb the development costs while still growing free cash flow, noting that former Boeing CEO Dave Calhoun once suggested $50 billion for the next new airplane, while the 787 cost more than $32 billion and the Bombardier CSeries cost $6 billion before Airbus took over the program.

In other recent news, Boeing has been awarded a series of defense contracts totaling approximately $310 million. This includes a $76.6 million contract for the Universal Armament Interface on B-52 aircraft and a $35.3 million modification to an existing contract for C-17 Globemaster III sustainment, bringing the total contract value to $7.92 billion. Additionally, Boeing’s stock received attention from analysts, with Jefferies maintaining a Buy rating and a $255.00 price target, citing the company’s focus on developing its next-generation single-aisle aircraft. RBC Capital also reiterated its Outperform rating with a $250.00 price target, following updates from the Federal Aviation Administration regarding Boeing’s aircraft certification process. The FAA’s decision to allow Boeing to issue airworthiness certificates for the 737 MAX and 787 models was noted as a positive development by RBC Capital. Furthermore, Air India has secured a $215 million loan for refinancing Boeing aircraft, highlighting ongoing financial engagements involving Boeing’s clients. These recent developments underscore Boeing’s active participation in defense contracts and its ongoing efforts in aircraft development and certification.

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