In an unforeseen development, Airbus has disclosed a substantial downward adjustment in its financial objectives, resulting in a significant decline in its stock value. The aerospace company has announced a reduced delivery target of 770 aircraft for the current year, a notable decrease from the previously projected figure of 800 aircraft. Furthermore, production rates for its A320 aircraft, which serves as its most popular model, will be postponed until 2027, impacting the overall performance of the company.
Adding to its challenges, Airbus has allocated a provision of EUR 900 million following a review of its space programmes, resulting in an expense that will impact its financial statements for the first half of 2024. Consequently, the company has revised its forecasted operating income to EUR 5.5 billion, down from the previous estimate of EUR 6.5 billion to EUR 7 billion. In addition, the adjusted free cash flow before customer financing is now projected to be approximately EUR 3.5 billion, compared to the previous figure of €4 billion.
The announcement has reverberated through the market, leading numerous analysts to express dissatisfaction with the revised guidance. For instance, Deutsche Bank has downgraded its recommendation on Airbus shares from “Buy” to “Hold” and adjusted its target price from EUR 186 to EUR 155. The bank’s analysts have highlighted underperformance in the space systems division, raising concerns about the company’s overall prospects.
Similarly, Citi analysts have lowered their forecasts for the upcoming years but have maintained that the recent decline in share price presents an opportunity for investment. They have pointed to Airbus’s substantial order book of 8,500 aircraft as a supporting factor for their valuation. RBC Bank shares a similar perspective, sustaining an “outperform” rating for Airbus shares with a price target of EUR 180.
Despite the disheartening announcement, Morningstar analyst Nic Owens has maintained his fair value estimate of EUR 163 per share, indicating a degree of confidence in the long-term potential of the company. Nevertheless, the unexpected contraction in financial targets has raised apprehensions about Airbus’s capacity to navigate challenges in the aerospace industry.
This revelation comes at a demanding time for aircraft manufacturers, with Airbus’s primary competitor Boeing confronting its own array of tribulations, including potential legal charges related to two fatal crashes. The industry is contending with safety concerns and production delivery targets, exerting pressure on the financial performance of major players.
As Airbus contends with a revised perspective and market volatility, investors and industry observers will be closely scrutinising the company’s subsequent actions in response to these difficulties. In a climate of uncertainty in the aerospace sector, the capability of companies like Airbus to adapt and innovate will be pivotal in determining their future success.