NEW YORK (TheStreet) --Shares of Boeing Co. (BA - Get Report) are down by 1.76% to $155.53 in pre-market trading on Monday morning, after analysts at Goldman Sachs cut the aerospace company's rating to "sell" from "neutral."
The firm said it reduced its rating on Boeing based on its belief that the company's demand and free cash flow could end up disappointing expectations.
Goldman lowered its commercial aerospace sector view to "neutral" following six years of holding an attractive view.
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"The group has outperformed substantially, while downside risks have heightened," Goldman said in an analyst note.
"After nearly a decade of undersupplying the market, Boeing and Airbus (EADSY) have caught up. Boeing and Airbus total production in 2015 will be close to double 2008 production. A seats based supply/demand model suggests the OEMs are now oversupplying the market. And the traffic growth and replacement demand required to sustain medium-term planned production may prove tough to achieve," Goldman added.
Goldman said it believes that Boeing is "most exposed" to the demand risks of new aircrafts.
Separately, TheStreet Ratings team rates BOEING CO as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:
"We rate BOEING CO (BA) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, good cash flow from operations, solid stock price performance and impressive record of earnings per share growth. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- BA's revenue growth has slightly outpaced the industry average of 0.4%. Since the same quarter one year prior, revenues slightly increased by 2.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
- BOEING CO has improved earnings per share by 25.5% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, BOEING CO increased its bottom line by earning $7.40 versus $5.97 in the prior year. This year, the market expects an improvement in earnings ($8.45 versus $7.40).
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Aerospace & Defense industry average. The net income increased by 18.9% when compared to the same quarter one year prior, going from $1,233.00 million to $1,466.00 million.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Aerospace & Defense industry and the overall market, BOEING CO's return on equity significantly exceeds that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: BA Ratings Report