(BFM Bourse) – The European aeronautical group suffered two lowerings of recommendations in two days from Jefferies and Bank of America. The aircraft manufacturer should still see its activity be penalized by tensions in the supply chain this year.
“When I look at myself I am sorry, when I compare myself I console myself”, explained Guillaume Faury, the executive chairman of Airbus on our antenna, at the beginning of January. Airbus delivered 661 planes last year, largely consolidating its lead over its eternal American rival Boeing, which only posted 480 units.
The Chicago group again suffered heavy losses for the whole of 2022 this week as the European company is expected to post a net profit of several billion euros, with Bank of America forecasting an adjusted net profit of 3.78 billion.
Nevertheless, the difference between the copy finally returned by the group and the promise of the beginning of the year is substantial. Airbus had, a little less than a year ago, indicated that it was counting on 720 aircraft deliveries for 2022, before reducing this objective to 700 during the year and then abandoning it in December. In total, nearly 60 planes are missing compared to the initial forecast.
An unobvious catch-up
The group has suffered significant tensions throughout its supply chain, particularly in terms of engines. This complex environment should continue into 2023. Especially since the reopening of the Chinese economy, if it is good news in itself, adds uncertainty, due to the spread of the coronavirus in the country.
“In the short term it’s very complicated, I hope that in the first quarter we will regain visibility, serenity, that we will be able to return to meet our interlocutors, our customers, our suppliers in China”, explained Guillaume Faury in early January on BFM Business.
Due to the competitiveness of its products, in particular its A320 neo single-aisle range, the strong demand for its aircraft and the gradual ramp-up of its production, Airbus is a consensus value for analysts, who have almost all recommended the title for purchase over the past two years.
But the setback on 2022 deliveries scratched that high love rating. The German bank Berenberg, in mid-January, revised its opinion downwards, from “buy” to “keep” on the action. While he appreciates the aircraft manufacturer’s competitive positioning and its long-term prospects, the financial intermediary fears that inflationary pressures will put the group’s profit margins under pressure.
This week it was Deutsche Bank on Thursday, then Jefferies on Friday who each made this move, downgrading their advice to “hold” when they were previously on the buy side. The title also lost 3.6% on Friday, due to the lowering of opinion of Jefferies.
Deutsche Bank had to revise its forecast because “the lackluster delivery performance for 2022 calls into question our delivery sequence for 2023-2025 and there is no possibility that Airbus will quickly catch up with the shortfall of 40 units seen in 2022”.
Caution in sight for 2023?
“We believe the company needs to overhaul delivery expectations once and for all to allay current investor concerns, and the sooner the better, as we believe history [que présente l’action, NDLR] continues to offer solid fundamentals”, explains the bank, which recalls that the action “is always at the mercy of the supply chain”.
Jefferies draws a similar conclusion. “We remain convinced that Airbus has an interesting story to offer in the medium term, but we prefer” the values carried by the “aftermarket” that is to say after-sales services (maintenance, overhaul, spare parts) “in the context of reopening China”. The bank cites in particular the engine manufacturer Rolls Royce. She also highlights two issues that could weigh on the stock, namely the absence of the announcement of a new CFO – Dominik Asam, the current one, due to leave in March – as well as the high basis for comparison of the results. in the first quarter of 2022.
Obviously, Airbus still retains credit. Both Barclays and Bank of America, to name a few, have recently confirmed their buy view, with the latter deeming the current valuation “attractive”.
But given its 2022 precedent, Airbus could be cautious when it announces its annual targets on February 16. Bank of America believes the group will announce targets of 750 aircraft deliveries and adjusted operating profit of around 6 billion euros. Jefferies is on a similar wavelength, anticipating targets of 740 aircraft deliveries and an adjusted operating profit of 5.9 billion -6 billion euros.
Julien Marion – ©2023 BFM Bourse
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