Shares in aircraft manufacturer Airbus (AIR) posted the biggest fall on the Paris Bourse after the company issued a profit warning due to problems with its supply chains and asset write-downs. At 10:42 UK time, the share price was down 11.2% at EUR 132.84 (£112.27).
In a press release issued after trading on Monday 24 June, Airbus indicated it would only be able to deliver 770 aircraft this year instead of the 800 previously announced.
Production rates for the A320, its best-selling aircraft, will not reach 75 units per month until 2027, the company warned – a year later than forecast.
The group also indicated that it had set aside a provision of EUR 900 million following the review of its space programmes, a charge which will impact the accounts for the first half of 2024, due on 30 July.
On the basis of these factors, Airbus now expects adjusted operating income of EUR 5.5 billion in 2024 (compared with EUR 6.5 billion to EUR 7 billion previously), and adjusted free cash flow before customer financing of around EUR 3.5 billion (compared with €4 billion previously).
The news comes as other major aircraft manufacturers soul search amid problems with safety and manufacturing delivery targets. Airbus’s main competitor Boeing (BA) is facing a raft of problems, including possible criminal charges, over a deferred settlement after two fatal crashes.
Key Morningstar Metrics For Airbus
• Fair Value Estimate: €163
• Price/Fair Value: 0.91
• Morningstar Rating: ★★★
• Morningstar Uncertainty Rating: Medium
• Economic Moat: Wide
The publication of Airbus’s latest guidance is a disappointment for several analysts.
Deutsche Bank has lowered its opinion on the share from “Buy” to “Hold”, and has revised its target price from EUR 186 to EUR 155.
“Space systems continue to underperform, after an already difficult 2023,” the bank’s analysts wrote in a note published on Tuesday.
“The situation is reminiscent of 2022, but this time it’s made even worse by Space. The dust must settle before we can become positive again.
“June deliveries are apparently sluggish and there is no guarantee at this stage that the new delivery target will be easy to meet by the end of the year.”
In a note also published on Tuesday, Citi analysts revised their forecasts downwards by 12%-19% for the period 2024-2027, but believe that the fall in the share price represents a buying opportunity.
“We believe that the order book of 8,500 aircraft supports the valuation and that the current weakness represents a buying opportunity,” they wrote.
RBC Bank shares a similar view. In a note dated 24 June, its analysts said:
“We believe that many of the headwinds in the space and commercial businesses are reflected in the share price, and we maintain our ‘outperform’ view with a price target of EUR 180.”
In a note that was finalized in advance of Monday’s profit warning, Morningstar analyst Nic Owens maintains his fair value estimate of EUR 163 per share.
Clarification: Morningstar analyst Nic Owens maintained his Fair Value estimate of EUR 163 per share prior to the release of Monday’s profit warning.
