On Tuesday, Jefferies, a financial services company, adjusted its outlook on Airbus shares, lowering the price target to €155 from the previous €190. Despite this reduction, the firm maintains a Buy rating on the European aerospace corporation.
The price target revision followed an unexpected guidance cut by Airbus, which resulted in a notable decline in the company's share price. Jefferies cited the guidance cut as a significant event but affirmed its positive stance on Airbus for the mid-term, suggesting the current valuation still presents an investment opportunity.
In light of recent developments, Jefferies has revised its earnings per share (EPS) estimates for Airbus, reducing them by 14-21% for the period from 2024 to 2027. This reassessment has been characterized as a final effort to de-risk projections for the aerospace manufacturer.
The firm's analyst commented on the situation, stating, "Airbus's surprise guide cut announced yesterday led to a significant drop in share price. While a setback, we still see the mid-term as value enough to maintain a Buy rating on Airbus." The analyst also acknowledged the uncertainties that persist regarding the pace at which Airbus will increase production.
This price target adjustment reflects a cautious yet optimistic view of Airbus's financial prospects, taking into account the immediate challenges while still recognizing the company's potential for growth in the coming years.
In other recent news, Airbus is on the cusp of acquiring four plants from Spirit AeroSystems (NYSE:SPR), including key facilities in Kinston, North Carolina, and Northern Ireland, which are central to Airbus aircraft production. This comes amidst a series of challenges for Airbus, including engine supply shortages causing delays in the production of narrowbody jets, leading to a decrease in the company's profit forecasts and a trim in its 2024 delivery target.
The aerospace giant has also seen a series of analyst adjustments. Berenberg reiterated its sell rating on Airbus, following a significant profit warning issued by the company. JPMorgan (NYSE:JPM) reduced Airbus's price target to €172 due to supply chain issues and a profit warning, while Deutsche Bank (ETR:DBKGn) downgraded Airbus's stock from Buy to Hold, lowering its price target to €155. However, Morgan Stanley (NYSE:MS) maintained its Overweight rating on Airbus with a steady price target of EUR190.00.
Airbus has also revised its delivery guidance by about 4% to 770 aircraft for fiscal year 2024 due to these supply chain challenges. The company's earnings before interest and taxes (EBIT) forecast for FY24 has been reduced by approximately 20%, with free cash flow (FCF) expectations trimmed by about 13%. Amidst these changes, Airbus is planning to enforce mandatory weekend overtime at its A220 plant near Montreal to address ongoing production delays. The U.S. Federal Aviation Administration (FAA) is also investigating Airbus for the use of counterfeit titanium parts in their jets.
InvestingPro Insights
Adding to the perspective provided by Jefferies, InvestingPro data underscores the financial metrics that investors might consider when evaluating Airbus's current market position. With a market capitalization of $113.9 billion and a P/E ratio of 27.05, Airbus is trading at a premium relative to its earnings. The adjusted P/E ratio for the last twelve months as of Q1 2024 stands at 30.0, which indicates a high valuation by the market. Furthermore, the company's revenue growth of 13.65% over the last twelve months signals robust financial performance.
From a strategic standpoint, Airbus holds more cash than debt on its balance sheet, an InvestingPro Tip that suggests a solid financial foundation. Additionally, the company has raised its dividend for 3 consecutive years, reflecting confidence in its financial health and a commitment to returning value to shareholders. On the flip side, two analysts have revised their earnings downwards for the upcoming period, indicating potential headwinds.
Investors interested in a deeper dive into Airbus's financials and further analysis can explore additional InvestingPro Tips, with a total of 12 more available on the platform. For those looking to enhance their investment strategy with these insights, using the coupon code PRONEWS24 grants an extra 10% off on a yearly or biyearly Pro and Pro+ subscription at InvestingPro.
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