ii view: Airbus ramps up deliveries

Airbus benefits from higher commercial aircraft deliveries, but Brexit overshadows.

Half-year results

• Revenue up 24% to €30.86 billion
• Adjusted profit up 87% to €2.09 billion
• Earnings per share up 141% to €1.54 per share
• Net cash position down 51% to €6.56 billion

Chief executive Guillaume Faury said:

“The half-year financial performance mainly reflects the ramp-up in production of A320
Family aircraft and transition to the more efficient NEO version, as well as further progress
on the A350 financial performance. We continue to see good demand for our competitive product portfolio, including the new A321XLR, as shown by the strong market endorsement at June’s Le Bourget airshow.”

ii round-up:

Headquartered in Toulouse, France, Airbus SE (EURONEXT:AIR) manufactures commercial aircraft, military and commercial helicopters, fighter and transport aircraft, and satellites and space launch vehicles.

Fighting against arch rival Boeing to win sales, it employs a workforce of over 130,000.

This year’s Paris Air show saw it announcing details of the A321XLR - the latest evolution of its popular A320 series passenger aircraft. It boasts the longest single-aisle range in the world. It 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 routes such as India to Europe or China to Australia.

Rival Boeing Co (NYSE:BA) recently announced it would take a $5.6 billion exceptional cost regarding the grounding of its 737 Max aircraft. Management have forecast a likely return to service for the plane by the fourth quarter. 

The plane maker reported half year results in stark contrast to its rival. Revenues and profits both enjoyed double digit gains reflecting higher commercial aircraft deliveries. A total of
389 commercial aircraft were delivered, up from 303 in the first half of 2018. 

Less favourably, Brexit preparations had contributed to a drain on working capital. 

The share price was little changed in late afternoon stock market trading. 

ii view:

Airbus logged orders in June for 145 single-aisle jetliners from its A320 and A220 families, while delivering 76 aircraft. The company’s backlog of jetliners remaining to be delivered stood at 7,276 aircraft as of 30 June 2019. 

For investors, the volatile nature of the airline industry it manufactures for 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 some compensation. However, a 50% plus gain in the share price since the start of the year arguably injects some near-term caution. 

Positives: 

• Guidance for the full-year maintained
• Strong order book of over 7000 aircraft

Negatives:

• Preparations for Brexit had contributed to a drain on working capital
• Its giant A380 plane programme didn’t prove the success it had hoped for

The average rating of stock market analysts:

Buy