Airbus Earnings: As Supply Chain Pain Shuffles Jet Delivery Timing, Fair Value up a Touch

Wide-moat Airbus AIR reported its first-quarter 2023 results, sticking to its goal of delivering 720 jets this year. We will monitor those deliveries closely in coming months as the path Airbus must take to increase its production rates has narrowed with time and with just 127 planes out the door so far this year, Airbus is only 17.6% of the way to reach its annual deliveries target. Although the company failed to reach a similar goal last year (missing it by 39 planes) because of persistent supply chain issues, we will for the time being give the team benefit of the doubt as the company has a historical pattern of backloading its jet deliveries (and commensurate revenue and profit): in the first quarter of the three years through 2019, Airbus booked just under 17% of eventual annual commercial aircraft revenue.

We have raised our fair value estimate 2% to 156 EUR per share. Our fair value estimate for the U.S. depository shares increased by a greater 7% proportion to $43.50 because the U.S. dollar exchange rate weakened since we last published our model. The increase is due mostly to reinstating the company’s planned ramp-up in A220 production to 14 planes per month by 2026, more than triple the rate in 2022.

Very robust demand for Being’s commercial jets, evidenced by more than 7,000 planes already on order, and deliveries fully booked until 2029, continues to underpin our thesis that Airbus will see accelerated growth and profitability in its commercial jet division in the next four years, before leveling off at the end of the decade.