Analyst Note| Burkett Huey, CFA |
Wide-moat Airbus posted a solid first quarter overall, with revenue of EUR 10.5 billion and earnings per share of EUR 0.58, which beat FactSet consensus by 0.9% and 16%, respectively. We’re increasing our fair value estimate to EUR 124 from EUR 123 and maintaining our $37 fair value for the U.S. ADRs as we update our forecasts. The company posted EUR 1.1 billion of free cash flow, which is a little over half our annual estimate. We anticipate this quarter’s free cash flow is not sustainable, as the firm benefited from a nonrecurring change to payment terms with suppliers. The major puts and takes from this quarter were a larger pension shortfall, a time value of money increase, higher near-term margin assumptions on the A320 family aircraft, and a slightly faster A320 ramp-up. Overall, we still think shares are priced attractively, as we don’t think the market is fully appreciating the firm’s ability to ramp A320 family production after the pandemic and the major advantages it has at the upper and lower end of the narrow-body market.