This is when Boeing stock recovery may start: TD Cowen

TD Cowen's latest note suggests that while Boeing (NYSE:BA) may face a challenging second quarter, a strong recovery is anticipated in the latter half of the year. 

Boeing's productivity enhancements are expected to drive a substantial increase in free cash flow (FCF) to $10 billion by 2026. Despite current hurdles, TD Cowen reiterates its Buy rating on Boeing.

The second quarter is likely to underperform market expectations due to sporadic 737 deliveries and ongoing production issues. Management previously warned that deliveries would be "sporadic" and "lumpy" until mid-year. 

The bank noted that only 18 "clean" fuselages were approved from Spirit AeroSystems (NYSE:SPR) in April, and Boeing needs to pass the FAA's 90-day audit in late May. 

Consequently, Q2 delivery numbers are projected to be lower than Q1, with an estimated revenue of $6.8 billion, 10% below consensus. Cash outflow is expected to reach $3 billion, doubling the Street's forecast.

TD Cowen forecasts a "hockey stick" recovery in the second half of 2024. As SPR accelerates the delivery of "clean" 737 fuselages, Boeing's productivity and delivery rates are expected to improve significantly.

This is expected to drive a sequential lift in Q3 and Q4, with Boeing potentially achieving a delivery rate of approximately 38 aircraft per month by the end of 2024. In Q4, Boeing's sales are anticipated to align with market expectations, while FCF could exceed estimates at around $6 billion.

Nevertheless, several key issues, including labor negotiations and the potential acquisition of SPR, could constrain Boeing's stock in the short term. 

Despite these hurdles, TD Cowen remains optimistic about Boeing's long-term prospects, suggesting significant gains may begin in the latter half of 2024 as production processes stabilize and strategic initiatives take effect.