ii view: Airbus keeps post-pandemic recovery on course

This European aircraft maker's share price has comfortably outperformed US rival Boeing year-to-date. We assess prospects. 

Nine-month results to 30 September

• Revenue up 8% to €38.1 billion
• Adjusted profit up 3% to €3.55 billion
• Net cash held up 3% to €7.97 billion

Chief executive Guillaume Faury said:

“Airbus delivered a solid nine-month 2022 financial performance in a complex operating environment. Our teams are focused on our key priorities and in particular, delivering the commercial aircraft ramp-up over the coming months and years.”

ii round-up:

Plane maker Airbus SE (EURONEXT:AIR) detailed growth in both sales and adjusted profit as its airline customers continued to recover from the global pandemic.

• Find out about: US Earnings Season | Top US Stocks | Interactive investor Offers

Revenues for the nine months to the end of September rose 8% year-over-year to €38.1 billion, pushing adjusted profit up 3% to €3.55 billion. Expected full-year commercial aircraft deliveries of 700, up from 611 in 2021, along with favourable currency movements, also helped it increase its expected full-year free cashflow outcome to €4.5 billion from €3.5 billion. 

The price for Airbus shares is down 5% year-to-date having about doubled from pandemic stock market lows. Shares in US rival Boeing Co (NYSE:BA) have fallen by more than a quarter in 2022, while British Airways owner International Consolidated Airlines Group SA (LSE:IAG) are down by around 15%.

The Toulouse headquartered Airbus continues to expect adjusted annual profit of around € 5.5 billion, up from the €4.86 billion made during 2021.

Commercial aircraft deliveries of 437 for the nine-month period leave it with 263 over the fourth quarter to hit its annual target of 700. That’s still down from the 863 aircraft achieved in 2019, before the pandemic.

Airbus' helicopters business delivered 193 units during the nine-month period, almost the same as last year, but with revenue climbing 9% due to growth in service sales. 

Revenues for its Defence and Space business rose 10%, largely due to military aircraft. A total of seven A400M military transport aircraft were delivered during the period.

Annual results will likely be announced in February.  

ii view:

Airbus operates across the three divisions of Commercial aircraft, Space and Defence and Helicopters. Commercial aircraft generate most of its sales at just over two-thirds, followed by Defence and Space at around a fifth and Helicopters the balance at just over a tenth. It employs more than 130,000 people in over 150 locations globally and has around 12,000 direct suppliers. 

• The Week Ahead: BP, Next, Sainsbury’s
• Time to buy one of Warren Buffett’s favourite stocks now?
• How to invest for difficult times

For investors, a highly uncertain economic outlook, including rising interest rates cannot be ignored. Geopolitical tensions given a war in Ukraine remain high, costs for businesses generally have been rising, while supply chain challenges remain. 

On the upside, significant costs have been removed given a major restructuring in the wake of the pandemic. Pressure for airlines to reduce their environmental impact via more efficient aircraft is ongoing, while the previous restarting of the dividend payment suggests confidence in the outlook. 

For now, and while some caution looks sensible, a consensus fair value estimate of over €135 per share implies grounds for longer term optimism. 

Positives: 

• A focus on cost savings
• Net cash held of €7.97 billion

Negatives:

• Uncertain economic outlook
• Concerns for aviation’s impact on climate change

The average rating of stock market analysts:

Strong buy