ii view: Airbus shares rocket to two-year high

A surging share price, paying a dividend again and helping airlines achieve more climate friendly fleets. Buy, sell, or hold?

Full-year results to 31 December

• Revenue up 13% to €58.7 billion (£52.2 billion)
• Adjusted profit up 16% to €5.63 billion (£5 billion)
• Dividend up 20% to €1.80 per share 
• Net cash held up 22% to €9.4 billion

Chief executive Guillaume Faury said:

“The industry continued its recovery during 2022, with air traffic increasing and airlines turning to their long-term fleet planning. We delivered solid financials despite an adverse operating environment that prevented our supply chain from recovering at the pace we expected.”

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ii round-up:

Plane maker Airbus SE (EURONEXT:AIR) reported gains in both annual sales and profits as its airline customers continued to recover from the global pandemic.

Commercial aircraft deliveries of 661 during 2022, up from 611 in 2021, helped revenue climb 13% to €58.8 billion (£52.2 billion), boosting adjusted profit by 16% to €5.63 billion (£5 billion)

Airbus shares rose by around 3% post the figures, leaving them up by just over a tenth year-to-date. That’s similar to major rival Boeing Co (NYSE:BA), although far short of the 50%-plus gain at easyJet (LSE:EZJ) which flies a fleet of Airbus jets.

For 2023, Airbus expects further improvements with commercial deliveries forecast to rise to 720 planes and adjusted profit estimated to come in at €6 billion.  

The results came just days after Air India ordered more than 200 aircraft from each of Airbus and Boeing, the biggest aircraft order ever. 

A ramp-up in production following the pandemic has been hampered by continued supply chain disruption, and research & development costs rose 12% in 2022 to €3 billion. 

Away from its core commercial aircraft product, sales for helicopters gained 15% to €7 billion, with space and defence revenue up 11% to €11.3 billion.

First-quarter results are scheduled for 3 May.   

ii view:

Started in the year 2000, Airbus today employs over 130,000 people. Commercial aircraft generate most of its sales at around 70%, followed by Space and Defence and including fighter jets at almost a fifth and helicopters, previously called Eurocopter, the balance. 

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For investors, an uncertain economic outlook including rising interest rates cannot be overlooked. Geopolitical tensions given a war in Ukraine remain high, costs for businesses generally have been rising, while supply chain challenges remain. 

On the upside, robust travel demand at its airline customers post the pandemic looks to be feeding through into new aircraft orders. Sizeable costs have also been removed via a major restructuring since the Covid crisis, pressure for airline customers to reduce their environmental impact via more efficient aircraft is ongoing, while the dividend is now being paid again. Restarting dividend payments also suggests confidence in the outlook. 

While some caution remains sensible given industry conditions, a fragile global economy and an already resurgent share price, Airbus is a high-quality business that many analysts believe is worth more than the current share price (consensus estimate of fair value is over €140). 

Positives: 

• A focus on cost savings
• Net cash held of €9.4 billion

Negatives:

• Uncertain economic outlook
• Concerns for aviation’s impact on climate change

The average rating of stock market analysts:

Buy