#Airbus #SupplyChain #ProfitWarning #Aerospace #StockMarket #EarningsForecast #CommercialAircraft #FinancialMarkets
Late on Monday, Airbus, the European aerospace behemoth, issued a significant market update that had a ripple effect across European stock markets come Tuesday. The company announced serious supply chain challenges necessitating a significant downward revision of its earnings forecast and aircraft delivery targets for 2024. This update detailed persistent issues primarily with engines, aerostructures, and cabin equipment that are contributing to the supply chain constraints.
As highlighted in the company’s 2024 guidance update, the shortage encompasses over a million items, including key components like engines and aerostructures, as well as cabin interiors. Due to these challenges, Airbus has revised its commercial aircraft delivery forecast down to 770 units from an initial expectation of 800 units at the start of the year. Moreover, the adjusted earnings before interest and tax (EBIT) are now expected to hover around 5.5 billion euros, a significant drop from the previously targeted 7 billion euros. Furthermore, the outlook for free cash flow before customer financing has been slashed to approximately 3.5 billion euros.
These financial revisions came alongside charges reported on certain telecommunications, navigation, and observation space programs, totaling around 0.9 billion euros. Additionally, the A320 family production rate has been adjusted, maintaining a target of 75 aircraft per month but postponing the achievement of this rate to 2027, reflecting the ongoing specific supply chain challenges in a degraded operating environment. This update has led to a significant impact on Airbus shares, which saw an 11% tumble in Paris, marking the most considerable intra-day decline since November 2021. This downturn not only affects Airbus but also has sent suppliers’ shares tumbling, affecting a wide range of companies involved in the aerospace industry.
Wall Street’s reaction to Airbus’s announcement has been of shock and concern, with several analysts revising their positions and forecasts for the company. Deutsche Bank described the profit warning as “stunning” and “rather damaging,” prompting cuts in Ebit and free cash flow estimates for 2024-26 by 13%-20%. Similarly, analysts from RBC and Citi have adjusted their outlooks in light of this update, noting the ongoing frustration with supply chain issues but also acknowledging Airbus’s long-term potential. Morgan Stanley, despite noting the disappointing nature of the update, highlighted that the previous guidance had been reiterated not long before, illustrating the rapid shift in Airbus’s financial outlook. This situation underscores the intense challenges facing the aerospace industry, particularly in managing the intricate supply chains essential for aircraft production.
Comments are closed.