Airbus cuts profit guidance on Space, lowers jet delivery forecast

(Sharecast News) - Airbus warned of a hit to its bottom line and cash flow as a result of charges incurred on certain of its space activities. Total full-year earnings before interest and tax would be reduced by about €900m, due to financial charges incurred by its telecommunications, navigation and observation programmes.

Those activities sat in the company's Space Systems division.

Nonetheless, the cash impact during the current year from those charges in Space Systems would be much smaller, roughly a third of that amount, management said on a call with analysts.

The charges were expected to really be incurred over many years, depending on the project in question, but would be booked during the second quarter.

The engineer also cut its target for commercial airplane deliveries in 2024 from 800 to 770, due to a worsening lack of engines and a shortfall in the availability of seats to fit out its new jets.

Airbus executives stressed that they were dealing with specific situations in the supply chain, as opposed to a general worsening, which were affecting the second quarter and might also have an impact during the third quarter.

That also meant that its goal of ramping up output of A320 jets to 75 per month was pushed back by one year to 2027.

Its aerostructures business meanwhile was being affected by the ongoing challenges at its supplier Spirit AeroSystems.

Free cash flow before customer financing was now pegged to come in at around €3.5bn for 2024, versus the roughly €4.0bn anticipated in February.

ADRs of Airbus fell by 6.14% to $37.14 per share in NY trading.

Airbus's new guidance did not include potential outcomes from its ongoing discussions with Spirit AeroSystems.

The mid-to-high single digit margin goal was kept, but was now expected to take slightly longer to achieve, and Airbus was still looking to ramp-up production in 2025.

Commenting on Airbus's profit warning and lowered guidance, analysts at Berenberg highlighted the shares free cash flow yield of "just" around 2.9% for the 2024 fiscal year.

That valuation, they said, was based on an "unprecedented and overly ambitious" ramp-up in commercial jet output that had been/was expected to push FCF margin expansion materially above historical averages.

Berenberg was at 'sell' on shares of Airbus with a €119 target price.

Analysts at RBC were less downbeat, telling clients that: "We believe many of the headwinds in the space and commercial business are reflected in the stock today, and we remain outperform with a €180 [target price]."

Before the prior night's profit warning, RBC had a €190 target on Airbus shares.