MTU Aero Raises Guidance; Shares Trading in Discount Territory

Wide-moat MTU Aero Engines raised full-year guidance after lowering it just the previous quarter. The group now expects sales for 2022 to be between EUR 5.4 billion and EUR 5.5 billion (EUR 5.3 billion previously), while EBIT is expected to grow in the low 30% range (mid-20% previously). Foreign-exchange tailwinds and better-than-expected maintenance, repair, and overhaul sales underpin the higher guidance. Group revenue for the first nine months of 2022 increased by 27% and EBIT by 46%. Higher sales of spare parts and MRO activities, as global flight activities resumed, drove the increase, with new engine deliveries still lagging due to supply chain constraints. Looking to 2023, we believe that foreign-exchange tailwinds will most likely disappear, while higher MRO warranty work will put pressure on margins.