Thales Maintains Momentum; Slight Increase in FVE; Shares Approaching Fair Value

Narrow-moat Thales carried the momentum from the first half into the third quarter. Organic order intake and sales in the third quarter were up 36% and 8.5%, respectively. Reported sales growth of 13.7% benefited from the strong U.S. dollar as a large share of the group’s sales are denominated in USD. Management upgraded organic sales growth guidance for the full year to the previous upper end of the range at 5.5%, while midpoint EBIT margin guidance remains unchanged at 11%. The group is well positioned over the medium term—the defense business will benefit from multiyear increases in defense budgets while the civil aerospace and digital identity and security segments will see a cyclical upswing after two years of depressed demand. The sale of the transport business will result in a more focused portfolio.