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Investing.com -- Vertical Research Partners upgraded Boeing (NYSE:BA) stock to Buy, saying the aerospace group is entering a steadier phase of the cycle with improving supply chain dynamics and signs of progress across its commercial, defense and corporate operations.
While the aerospace upcycle remains intact, the industry is shifting into what it described as a mid-cycle environment, the broker said. Airline revenue passenger mile (RPM) growth is expected to normalize around 5%, while supply chain hurdles that disrupted production in recent years are easing.
Against that backdrop, Vertical analysts see room to take a “more balanced aero aftermarket vs OEM stance” and highlighted Boeing as the most prominent name to benefit.
On the commercial side, the note pointed to stability on the 737 and 787 programs, with most suppliers delivering at targeted rates despite some destocking hiccups. The completion of Boeing’s acquisition of Spirit AeroSystems in the fourth quarter and the closure of shadow factories are expected to strengthen internal production.
Although supplier cost inflation is anticipated, analysts said it should be offset by “robust new aircraft pricing and escalation clauses.”
In defense, the team believes that risks remain on fixed-price contracts, but the situation has “stabilized” following personnel changes and a more conservative approach to long-term projections. Margins may take years to fully recover, but modest annual improvement is now seen as achievable.
Vertical also flagged cultural shifts under CEO Kelly Ortberg, noting “a far less arrogant tone," and the recent appointment of CFO Jay Malave was seen as another positive step in this area.
"This improvement has also been noted by customers and suppliers, with a number now commenting that they have much more faith in Boeing actually delivering on its projections," analysts said.
Earnings forecasts were left unchanged, with core EPS estimates at a loss of $2.36 for 2025 and a profit of $2.86 in 2026. Free cash flow is projected at a $3.0 billion outflow this year before rebounding to $4.7 billion next year.
Based on 2027 multiples, the target price was raised to $270 from $242.
Overall, after favoring aftermarket names since COVID, Vertical analysts believe the time is right to pivot.
“With Boeing being one of the most prominent OEM names, with improving company specific metrics, we think it is an appropriate point to upgrade the stock from Hold to Buy,” they said.