Airbus
[AIR] started
of
the
new
year
with
a
strong
rise
in
aircraft
deliveries
year-on-year,
with
an
estimated
32
planes
delivered
in
January
2024.

The
ramp-up
was
primarily
driven
by
27
new
A320/321
aircraft

13
deliveries
more
than
in
January
2023,
when
output
had
been
depressed
by
supply
bottlenecks.
But
supplies
of
engines
and
other
aircraft
components
remain
comparatively
tight. 

Airbus’
previous
volume
high
was
864
planes
delivered
in
2019,
so
it
will
be
interesting
to
see
if
they
guide
a
number
for
2024
close
to
or
above
that,
says
Morningstar
equity
analyst
Nicolas
Owens.

“I
think
the
market
is
expecting
something
higher”,
he
says.
The
company,
which
has
a
Morningstar
Wide
Moat
Rating
issued
guidance
for
720
aircrafts
in
2023.

Owens
says
he
will
also
watch
for
any
efforts
to
increase
supply
chain
growth
so
it
can
build
A320s
faster
when
the
company
releases
results
on
Thursday.
Most
importantly,
the
outlook
for
2024
A320
production
rates
will
be
key.

“I
am
actually
expecting
[it]
might
‘disappoint’
here
and
give
a
lower
target
than
previously
expected,
possibly
taking
advantage
of
Boeing’s
slowdown
to
also
de-stress
[its]
supply
chain”,
Owens
adds.

Will
Boeing’s
Woes
Hit
Airbus
Stock
Too?

The
fatal
crashes
of
two
Boeing
737
MAX
8
aircraft
in
2018
and
2019
had
serious
consequences
for
competitor
Boeing
(BA),
and
led
to
the
grounding
of
the
entire
737
MAX
fleet
by
global
aviation
regulators
for
nearly
two
years.

To
this
day,
Boeing
is
working
out
flaws
in
its
manufacturing
processes
for
new
737
and
787
jets.
On
January
6,
the
US
Federal
Aviation
Administration
announced
171
Boeing
MAX
9s
must
be
inspected
before
they
can
fly
again.

“I
don’t
expect
Airbus
to
comment
on
Boeing
directly –
rather
I
expect
they
will
say
they
support
safety
in
the
product
and
they
might
also
get
a
question
or
two
about
their
manufacturing
processes,”
Owens
says.

Owens
estimates
Airbus’
fair
value
is
€160
(£136.22).
This
is
roughly
23
times
its
2023
earnings
estimate.
Its
enterprise
value
is
roughly
12
times
Morningstar’s
2023
estimates
for
earnings
before
tax
interest
depreciation
and
amortisation
(EBITDA).

The
primary
driver
of
valuation
is
the
ramp
up
of
margin-accretive
narrow-body
aircraft
after
the
pandemic.
“Overall,
we
expect
operating
margins,
which
are
roughly
equivalent
to
Airbus’
EBIT
adjusted
metric,
to
improve
to
about
12.5%
at
midcycle
versus
a
disappointing
8.5%
in
2022”,
Owens
says.

The
stock
is
currently
trading
in
Morningstar
3-Star
territory.

Key
Morningstar
Metrics
for
Airbus
Stock


Fair
Value
Estimate:
€160;
• Current
price:
€149.98;

Morningstar
Rating:
★★★;

Morningstar
Economic
Moat
Rating:
Wide;

Morningstar
Uncertainty
Rating:
Medium.

Airbus
Stock:
Who
is
Bullish
and
Who
is
Bearish?

Investment
bank
and
broker
Stifel
expects
adjusted
EBIT
for
the
fourth
quarter
2023
at
€2.1
billion,
versus
a

Bloomberg

consensus
estimate
of
€2.2
billion

The
estimate
implies
Airbus
will
slightly
miss
its
fiscal
year
adjusted
EBIT
guidance
of
€6
billion
by
roughly
3%.
But
free
cash
flow
will
exceed
guidance
due
to
the
strong
order
intake
in
fiscal
year
2023.

“Airbus
was
able
to
secure
a
record
2,094
orders
that
came
with
sizeable
downpayment”,
the
analysts
say.
For
2024,
Stifel
expects
the
company
to
guide
for
about
800
deliveries
and
an
adjusted
EBIT
of
€7
billion,
in
line
with
consensus
estimates.

Analysts
at
BofA
Global
Research
also
see
Airbus
in
a
good
shape.

2024
should
begin
a
period
of
mid-term
margin
expansion
driven
by
better
revenue
mix
on
the
A320
family
(skewed
towards
the
A321),
the
A350
becoming
a
significant
profit
contributor
and
hiring
slowing
from
2024
onwards,
they
say.
They
believe
the
company
will
guide
for
more
than
800
deliveries
in
2024. 

Analysts
at
UBS
are
more
sceptical,
however,
and
say
they
don’t
expect
any
meaningful
operating
leverage
to
be
visible
in
the
fourth
quarter
given
recruitment
costs.

In
addition,
peers
continue
to
cite
inflation
as
a
key
headwind.
The
analysts
put
commercial
EBIT
at
€1.7
billion,
2.4%
behind
consensus,
and €2.3
billion at
group
level,
slightly
above
consensus.

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