Airbus posts drop in earnings raising fears it may struggle to profit on Boeing's woes

By Louis Goss

Airbus on Friday said an increase in its costs, caused by inflation and supply chain issues, had seen its adjusted earnings drop in the first quarter of 2024, even as sales of its aircraft increased against the backdrop of ongoing problems at its main rival Boeing.

Strong demand for new planes, driven in part by the disruption at Boeing (BA), saw the Toulouse headquartered company boost its revenue by 9%, to EUR12.8 billion, as it delivered 142 commercial aircraft to its customers.

Higher costs, however, cut into Airbus' profit margins, leading to concerns the company may struggle to capitalize on Boeing's issues. The company blamed the higher costs on a series one-off issues, alongside the impacts of supply chain problems, increased R&D costs, and wage inflation.

The drop in Airbus' margins, in turn, saw the European plane maker fall short of analysts' expectations, as it posted a 25% drop in its adjusted earnings before interest and tax (EBIT) to EUR577 million ($620 million), compared to the EUR809 million expected by eight analysts, Factset data shows.

Shares in Airbus (FR:AIR) fell 2% on Friday after gaining 25% over the previous 12 months. Airbus stock is, however, down 7% since the start of April, which RBC's analysts said was a result of investors focusing on the company's "elevated spending" on fixing ongoing supply chain issues.

Airbus, nonetheless, held its guidance for 2024, in stating it still expects to generate EUR6.5- EUR7 billion in adjusted EBIT across the full-year, even as analysts at UBS, led by Ian Douglas-Pennant, said they now expect Airbus will hit the lower end of that range.

In a call with investors, Airbus CEO Guillaume Faury said the higher first quarter costs were partly caused by over EUR100 million in "expenses linked to the Employee Share Ownership Plan" and EUR30 million from exchange rates, which he said would not be repeated.

The UBS analysts said Airbus' results were "disappointing" across all divisions and they noted EBIT "barely increased," even excluding the higher costs linked to the employee share plan and foreign exchange.

The Airbus CEO also warned that supply chain issues that have plagued the company for over a year are "not improving", saying the company is "pouring a lot of human resources" into fixing the "difficult situation."

RBC analysts, led by Ken Herbert, nonetheless, said Airbus is now well positioned to boost its earnings long-term, as they said the "strong demand environment" should still boost the company's business going forwards.

-Louis Goss

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04-26-24 0613ET

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