Tuesday, Berenberg reiterated its sell rating on Airbus SE (AIR:FP) (OTC: OTC:EADSY) with a price target of €119.00, following a significant profit warning issued by the company. Airbus announced a downward revision to its full-year 2024 and medium-term financial forecasts, which includes an approximate 18% decrease in adjusted EBIT for FY24 and a 19% decline in free cash flow (FCF) before mergers and acquisitions and customer financing for the same period.
The profit warning is expected to negatively impact market forecasts for the coming years as well as the perceived intrinsic value of Airbus' stock, potentially affecting current stock multiples. The Airbus ADR (EADSY US) closed down around 6.1%, with anticipation of a more substantial movement in the underlying equity in today's trading session.
The updated financial outlook also appears to diminish the likelihood of share buyback initiatives and may influence the progression of dividend payments. Airbus' dividend policy is generally linked to GAAP EPS, and while the prospect of a regular dividend increase seems less likely, the company might still aim to maintain the overall dividend payout by potentially issuing a special dividend, similar to what was done in FY23. If this were to occur, the overall dividend yield would be around 1.9%.
In other recent news, Airbus has faced a series of challenges, from lowered earnings and revenue forecasts to investigations into the use of counterfeit parts. JPMorgan has reduced Airbus's price target to €172 due to supply chain issues and a profit warning, while Deutsche Bank downgraded Airbus's stock from Buy to Hold, lowering its price target to €155. Despite these developments, Morgan Stanley maintained its Overweight rating on Airbus with a steady price target of EUR190.00.
Airbus's earnings per share estimates for 2024-2027 have been revised downwards, reflecting these issues. Airbus also reduced its delivery guidance by about 4% to 770 aircraft for fiscal year 2024 due to 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%.
Airbus also faces an investigation by the U.S. Federal Aviation Administration (FAA) regarding the use of counterfeit titanium parts in their jets. In response to ongoing production delays, Airbus has communicated plans to enforce mandatory weekend overtime at its A220 plant near Montreal.
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