Investing.com -- Airbus has been upgraded to "hold" from "sell" by Berenberg, marking a shift in the brokerage’s outlook after two years of bearish forecasts.
The upgrade follows a reduction in forward earnings estimates, bringing consensus expectations more in line with reality.
Berenberg notes that its previous concerns—overly optimistic aircraft delivery assumptions, lower-than-expected operating leverage, and cost inflation effects on the backlog—have played out.
“After a material and multi-year reduction to forward estimates (e.g. c-30% to FY25/26 adjusted EPS)....we are no longer out of alignment with consensus, hence our upgrade to Hold,” the analysts said
Airbus reported full-year 2024 revenues of €69.2 billion, up from €65.4 billion in 2023. Adjusted EBIT declined to €5.35 billion from €5.84 billion, reflecting supply chain constraints and cost inflation.
The EBIT margin dropped to 7.7% from 8.9%. Despite these challenges, the company ended the year with €12.6 billion in net cash.
While Airbus maintains its target of ramping up A320 production to 75 aircraft per month by 2027, Berenberg remains skeptical.
“We maintain that there is still some modest downside risk to near- and medium-term estimates, and we remain sceptical about the achievability of the stated production rate targets in the outer years of forecasts,” Berenberg added.
The brokerage also flags Airbus’ growing reliance on end-of-year deliveries. “We also remain critical of the increasingly heavy Q4 weighting for deliveries, EBIT and FCF,” they added.
Consensus estimates predict an improvement in profitability, with adjusted EBIT expected to rise to €7.1 billion in 2025 and €8.6 billion in 2026.
EPS is projected to increase from €5.05 in 2024 to €6.25 in 2025 and €8.04 in 2026. However, Berenberg warns that these forecasts might still be overly optimistic. “Interestingly, and arguably a positive or negative, the sell-side no longer seems to believe management’s guidance on production rate targets, neither do most of the buy-siders we speak to,” the analysts said.
Valuation remains a key concern, with Airbus shares currently trading at 27.6 times 2025 earnings.
Berenberg’s assessment is clear: “We do not find the valuation compelling either.” The brokerage prefers defense and electricals industrial stocks over commercial aerospace due to a more favorable risk profile.
A recent sell-side dinner with chief financial officier, Thomas Toepfer reinforced these mixed sentiments.
While Airbus remains optimistic about its defense and space division, which accounts for approximately 17% of revenue, commercial aerospace challenges persist, particularly with supply chain bottlenecks affecting LEAP engine availability.
“The lower-than-expected delivery rates have resulted in Airbus operating with higher staffing levels than were required over the past 18-24 months, which in our view could and should have been avoidable with a better grasp on the supply chain situation,” Berenberg said.