On Tuesday, Deutsche Bank adjusted its stance on Airbus SE (AIR:FP) (OTC: OTC:EADSY), downgrading the stock from Buy to Hold and reducing the price target to €155 from the previous €186.
The decision came after Airbus issued a profit warning on June 24, which has led the bank to significantly lower its earnings before interest and taxes (EBIT) and free cash flow (FCF) forecasts for the years 2024 to 2026 by 13-20%. The downgrade reflects concerns over a delayed delivery schedule due to ongoing supply chain issues.
The bank noted that the revised delivery timeline, now pushed back by a year, echoes the challenges Airbus faced in 2022. The situation is exacerbated by the underperformance of the company's Space systems division, which had already experienced a tough year in 2023. The analyst highlighted that the current state of affairs requires a period of stabilization before a more optimistic outlook on the stock could be considered.
Airbus's June deliveries are reportedly slow, and doubts remain whether the new delivery targets can be met by the end of the year. This uncertainty has contributed to the bank's cautious perspective on the stock's near-term prospects.
Deutsche Bank's new price target of €155 reflects a reassessment of Airbus's financial health and market position in light of the recent profit warning and ongoing supply chain difficulties. The bank's decision underscores the impact of these factors on Airbus's future performance and its ability to meet delivery commitments.
In other recent news, Airbus faces several recent developments. The aerospace manufacturer has adjusted its forecast for fiscal year 2024 due to ongoing supply chain challenges, reducing its delivery guidance by approximately 4% to 770 aircraft. Airbus's earnings before interest and taxes (EBIT) forecast for FY24 has also been reduced by roughly 20%, with free cash flow (FCF) expectations trimmed by about 13%.
The U.S. Federal Aviation Administration (FAA) is investigating Airbus and Boeing (NYSE:BA) for the use of counterfeit titanium parts in their jets, which could potentially impact manufacturing processes in the aviation industry. Additionally, Airbus has communicated plans to enforce mandatory weekend overtime at its A220 plant near Montreal to address ongoing production delays due to supply chain issues and shortages of parts and labor.
In discussions with Qatar Airways, Airbus is anticipated to be part of a significant order of wide-body jets, although the exact details of the potential deal remain undisclosed. Lastly, Airbus has disclosed a significant charge related to its space programs following a comprehensive technical review.
These are among the recent developments involving Airbus.
InvestingPro Insights
Amidst the concerns highlighted by Deutsche Bank, Airbus SE (EADSY) remains a prominent player in the Aerospace & Defense industry, showcasing resilience with its financial metrics. According to InvestingPro data, Airbus holds a market capitalization of 111.56 billion USD, reflecting its significant size and influence within the sector. The company's P/E ratio stands at 26.51, which, while indicating a high earnings multiple, also reflects investor confidence in its profitability.
InvestingPro Tips suggest that Airbus has more cash than debt on its balance sheet, which is a strong indicator of financial stability and may provide a cushion against ongoing supply chain disruptions. Additionally, the company has raised its dividend for 3 consecutive years, demonstrating a commitment to shareholder returns even in challenging times.
While analysts have revised their earnings downwards for the upcoming period, it's also notable that Airbus has been profitable over the last twelve months. This profitability, coupled with a dividend growth strategy, could offer some reassurance to investors concerned about the immediate challenges faced by the company.
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