Analyst Note| Burkett Huey, CFA |
Wide-moat-rated Airbus reported a strong third quarter, as it continues to press its advantage over competitor Boeing in the narrow-body market. Revenue of EUR 10.5 billion and EPS of EUR 0.51 missed FactSet consensus by 3.0% and 4.2%, respectively, though the misses are attributable to required rework on aircraft finished but not delivered. Management is confident that it can get these aircraft delivered by year-end, and we have no reason to doubt this forecast. Adjusted EBIT and free cash flow guidance were increased by 12.5% and 25%, respectively, and we believe that management had previously provided very conservative guidance considering the operating environment. We believe the firm is in sufficient financial state to restart the dividend, and we expect the firm to propose a dividend with full-year 2021 results, given the firm’s policy of delivering 30%-40% of net income to shareholders and we note Airbus tends to pay an annual, rather than quarterly, dividend. We are raising our fair value estimate for Airbus to EUR 137 from EUR 134 ($40 from $39.50 for the U.S.-dollar-denominated shares) due to the time value of money.