One of two companies that make wide-bodied jets on global scale (the other being Boeing). Airbus is a genuine European champion.
Issues around corporate governance, safety and quality control, and more recently industrial action at its major rival, have provided Airbus with the runway to take a lead over its US peer.
However, as we previously noted deliveries of Airbus aircraft were running below pre-Covid levels as recently as October. That said, the company does appear to be ending the year with a flourish, having delivered 50 aircraft in October, and 84 in November, after just 32 deliveries in September.
Analysts believe that this increase is sustainable, thanks in no small part to improvements in the supply chain, for example, increased deliveries of aero engines from manufacturers like Saffran.
The stability of the supply chain will be tested, if the company is to meet its internal and highly ambitious target of 127 aircraft deliveries during December.
That compares to the 112 planes that it delivered in December 2023.
Ultimately Airbus would like to deliver 770 planes to customers in 2024.
As of the end of November delivery rates were up by 3.0% year over year, having been flat during October.
Airbus is also trying to improve its margins within civil aviation, and is rationalising its satellite and space based businesses. Whilst its defence arm has been boosted by an order for a dozen Eurofighters from Qatar.
The Airbus stock price has rallied by almost +20.0% over the last three months, and over the year to date it has outperformed Boeing by more than +50.0%.
Airbus trades on a forward PE of 20.24 times and Price to Cash Flow ratio of 23.48 times, which could be seen as demanding.
Goldman Sachs has recently written on French equities highlighting their extended period of underperformance versus the STOXX 600 index.
The bank doesn’t believe that French stocks are at attractive levels yet, but to some extent export-led multinational businesses, like Airbus, are less exposed to ongoing political and economic issues at home.
Airbus Outlook
Outlook
Airbus management needs to be able to control its supply chain and cost base, and continue to make inroads into its order book backlog of around 7500 aircraft, if it’s to turn the business around.
None of this is impossible but it does contain many moving parts, as such the execution risk remains high, and on that basis, I rate the stock as a 3.5 star.
Pros
- Global market leader
- Strong delivery growth
- Order backlog boost
Cons
- Execution risk high
- Valuation demanding
- Supply chain stability
-
Outlook
(3.5)
Overall
3.5
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