ii view: Airbus cuts 2019 aircraft delivery target

German production raises challenges, but the share price has enjoyed a strong tailwind year-to-date.

Nine-month results

• Revenue up 14% to €46.2 billion
• Adjusted profit up 51% to €4.1 billion
• Earnings per share up 49.5% to €2.81 per share
• Net cash position down 58% to €5.6 billion
• Maintains expected increase in adjusted earnings of approximately 15% compared to 2018

Chief executive Guillaume Faury said:

"Our nine-month results are mainly driven by the performance in commercial aircraft,
reflecting both the A320neo ramp-up and progress on the A350. We are focused on the A320neo ramp-up and improving the industrial flow while managing the higher level of complexity on the A321 ACF in particular."

ii round-up:

Maker of commercial and military aircraft, Airbus (EURONEXT:AIR) today cut its full-year delivery target for commercial jets as it reported nine-month results. 

Battling production delays at its newly expanded German plant, it now expects to deliver around 860 airliners in 2019, down from 880 to 890 previously targeted. 

Competing hard with troubled arch rival Boeing (NYSE:BA) to win sales, and coming in the wake of an order to supply 300 commercial aircraft to Indian budget carrier IndiGo, Airbus posted a doubling of adjusted nine-month profits.  

A total of 571 commercial aircraft were delivered in the period, up from 503 planes in the same period 2018. 

Headquartered in Toulouse, France, Airbus manufactures commercial aircraft, military and commercial helicopters, fighter and transport aircraft, and satellites and space launch vehicles.

The group maintained its full-year adjusted earnings estimate for an increase of 15% but trimmed its 2019 free cash flow expectation to reflect the revised delivery outlook.

ii view:

This year's Paris Air show saw Airbus announce details of the A321XLR - the latest evolution of its popular A320 series passenger aircraft. It boasts the longest single-aisle range in the world and can take 244 passengers. A newly designed fuel tank that could carry nearly as much fuel as bigger twin-aisle planes will help open routes to operators who want to fly India to Europe or China to Australia.

Major troubles at arch rival Boeing, given the grounding of its 737-max aircraft, are playing into Airbus's hands, but production difficulties in Germany mean that Airbus is not without its own challenges. 

For investors, the volatile nature of the airline industry it supplies leaves Airbus cyclical in nature. Government spending on military craft also has potential to inject volatility. A prospective dividend yield of over 1.5% and covered nearly three times by earnings offers a little compensation. However, a 50%-plus gain in the share price since the start of the year arguably warrants some caution near term. 

Positives: 

• Earnings guidance for the full-year maintained
• Strong order book of over 7,000 aircraft

Negatives:

• German production challenges
• Its giant A380 plane programme less successful than hoped for

The average rating of stock market analysts:

Strong buy