Investing.com — Airbus (EPA:), one of the leading names in global aerospace, stands out as a compelling investment for 2025.
As per analysts at BofA Securities in a note dated Thursday, the company has shown resilience and growth potential despite challenges in the aerospace sector, making it a noteworthy candidate for any equity portfolio in the coming year.
Airbus concluded 2024 with a robust delivery performance, achieving an estimated 750-760 aircraft deliveries, close to its guidance of 770 (+/-20).
This was largely driven by the acceleration of A320 deliveries in the fourth quarter, which exceeded expectations despite supply chain disruptions, particularly with LEAP engine issues. Interestingly, Q4 2024 saw a delivery increase of 13 aircraft compared to the same period in 2023.
However, the A350 segment underperformed slightly, with only 55 deliveries against BofA’s estimate of over 60.
While this reflects short-term challenges, the focus for 2025 will shift toward stabilizing production through the integration of Spirit, a move expected to address bottlenecks in fuselage production.
The upcoming fourth-quarter 2024 results in February are anticipated to provide guidance for 2025, with Airbus likely aiming for 800-810 deliveries.
Analysts project that improvements in supply chain efficiency, particularly in LEAP engine production, will drive a significant increase in output.
The certification of high-pressure turbine components is expected to alleviate prior constraints, enabling a more seamless ramp-up of A320 production.
Airbus is poised for a period of robust financial health, with an estimated cash conversion rate of 90% from 2025 through 2029.
This high level of free cash flow generation creates ample room for shareholder returns. BofA Securities expects Airbus to initiate a €1 billion share buyback program in 2025, with the potential for this to expand significantly in the mid-term.
Companies with strong capital return policies have historically been rewarded with higher valuations, and Airbus appears well-positioned to benefit from such a trend.
The current weakness of the euro against the US dollar presents a significant advantage for Airbus.
With $22 billion of hedged contracts in place for 2025 at a favorable exchange rate of 1.20, the company is set to capitalize on this tailwind. Analysts estimate a potential EBIT boost of approximately €200 million for every one-cent change in the euro-dollar exchange rate, making currency trends another important lever for profitability in the years ahead.
Airbus is currently trading at €154.78, with BofA Securities maintaining a price objective of €180. This reflects an upside of approximately 16.3%.
The valuation is supported by a projected earnings growth of 26% in 2025, with EPS expected to reach €6.89 compared to €5.46 in 2024. Airbus’s dividend yield is also set to improve, rising from 0.99% in 2024 to 1.25% in 2025.
While the outlook for Airbus is broadly positive, certain risks could impact its performance. Potential challenges include further supply chain disruptions, weaker-than-expected demand for A350 or A320 models, and adverse currency movements.
However, BofA analysts emphasize that the improving supply chain dynamics and ongoing demand recovery in the aerospace sector mitigate these risks to a significant extent.
Shares of Airbus were up 2.8% at 08:18 ET (13:18 GMT).
