On Tuesday, JPMorgan raised its price target on MTU Aero Engines AG (MTX:GR) (OTC: OTC:MTUAY) to EUR370.00 from EUR325.00, while keeping an Overweight rating on the stock. The adjustment comes as the firm anticipates multiple catalysts that could positively influence the company's performance in the near future.
The analyst highlighted an expected increase in the company's earnings per share (EPS) for the years 2024-2027, estimating a 2% annual rise. The revised EPS forecasts are now 4%, 7%, 6%, and 10% higher than the Bloomberg median consensus for those respective years. This optimistic stance is based on several factors that JPMorgan believes will drive MTU Aero Engines' growth.
Firstly, the firm projects robust third-quarter results for 2024 to be announced on October 24, attributing the expected performance to a favorable mix of original equipment (OE) and aftermarket (AM) sales. This strong showing could potentially lead MTU Aero Engines to increase its full-year guidance for 2024 for a second time.
Additionally, JPMorgan anticipates that during the Capital Markets Day scheduled for November 29, MTU Aero Engines will present medium-term guidance that surpasses current estimates from sell-side analysts. This event is seen as a potential driver for the stock's future trajectory.
Lastly, the analyst suggests that the financial impact of the GTF engine recall may be less severe than initially expected. Some airline customers may opt for payment-in-kind compensation, such as discounts on future spare parts, which could result in better than anticipated free cash flow (FCF) for MTU Aero Engines in the years 2024 to 2026.
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