Airbus is a buy after delivery targets expectations and future growth (OTCMKTS:EADSF)

I provide a monthly overview of orders, cancellations, deliveries, and other order book changes Airbus (OTCPK:EADSF, OTCPK:EADSY).While monthly orders and other order news releases don’t always directly impact Airbus Stock prices, tracking orders and deliveries are important as this provides the smallest nugget of information from which we can assess the European jet maker’s situation and spot trends early on. In this report, I will analyze Airbus orders and deliveries in August 2023.

How has Airbus stock performed?

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Since I provide reports monthly, it’s also interesting to see how Airbus stock is performing This month. After all, we perform analysis so that investors can make money. Therefore, it is important to check the stock price. In August, EADSF stock fell 1.2% versus the broader market’s loss of 1.5%, and so far this year we expect EADSF stock to have gained 19.9% ​​versus the broader market’s gain of 16.1%.

Airbus stock has still outperformed the market so far this year, but it has been facing some pressure. The company reported higher revenue but lower adjusted margins in the first half of 2023, with EBIT falling 27%. Additionally, problems with Pratt & Whitney’s geared turbofan engines are weighing on stocks, and the Airbus A321XLR may not quite live up to the range Airbus has promised. All of this does put some pressure on Airbus stock, while the company also appears to be scrapping its mid-year production target for 2024.

Airbus aircraft order news

In August, Airbus received a total of 117 orders, an increase of 57 from the previous month. These orders include 87 wide-body aircraft and 30 single-aisle jets, with an estimated value of $8.7 billion:

• An unnamed customer ordered 12 Airbus A321neo aircraft.
• Wizzair (OTCPK: WZZAF, OTCPK: WZZZY ) has ordered 75 Airbus A321neo aircraft.
• Air Algeria has ordered five Airbus A330-900s and two Airbus A350-1000s.
• Avolon has ordered 20 Airbus A330-900s.
• An unnamed customer ordered three Airbus A330-900s.

During the month, the following changes occurred in the order book:

• Avolon converted an order for 50 Airbus A320neo aircraft into an order for 50 Airbus A321neo aircraft.
• CMB Financial Leasing converted an Airbus A320neo order into an Airbus A321neo, which was subsequently marked as unidentified.
• One or more unidentified customers converted an order for three Airbus A320neo aircraft into an order for three Airbus A321neo aircraft.
• BoCom Leasing was identified as a customer for one Airbus A320neo.
• Flynas was identified as a customer for one Airbus A320.
• Tibet Airlines was identified as the customer of an Airbus A319neo.
• Turkish Airlines has been identified as a customer for four Airbus A350-900s.

Airbus received a total of 117 total orders worth US$8.7 billion, with no cancellations. This month we have seen Air Algeria finalize an order announced on June 1, while Avolon finalizes an order for 20 Airbus A330-900neos announced during the Paris Air Show, as well as significant changes to its single-aisle order book.

A year ago, Airbus had no orders booked and canceled 13 aircraft, bringing its net order count to -13 aircraft with a net order value of -$3.3 billion. As a result, gross and net orders improved significantly year over year, with Wizzair and Avolon orders driving order volume and value.

Airbus has booked 1,218 net orders worth $82.1 billion so far this year, compared with 637 net orders last year worth about $29.1 billion. So we’re seeing a significant increase in net orders due to large widebody order cancellations last year, the impact of Qatar Airways’ cancellations last year and reinstatement this year, and Air India’s large orders this year.

Airbus aircraft deliveries improve

In August, Airbus delivered 52 aircraft, compared with 62 last month. The European jet maker delivered 49 single-aisle jets and three wide-body aircraft with a total value of $3 billion:

• Airbus delivered eight Airbus A220 aircraft.
• A total of 41 Airbus A320neo family aircraft were delivered, including 1 Airbus A319neo, 17 Airbus A320neo aircraft and 24 Airbus A321neo aircraft.
• Airbus delivered an Airbus A330-900 aircraft to Aviation Leasing (AL) and leased it to ITA Airlines.
• Two Airbus A350s were delivered, including an Airbus A350-900 and an Airbus A350-1000.

Compared with last year, the number of deliveries in August increased by 22 units, and the value of deliveries increased from US$2.6 billion to US$3 billion. We are seeing improvements in delivery numbers, which provides evidence that supply chain issues are easing, but it is too early to draw firm conclusions. The number of deliveries this year increased by 53 units to 433 units from last year’s 380 units. As deliveries increased, the value of deliveries increased from $27.8 billion to $24.8 billion. Deliveries are still on hold, but Airbus should be able to meet its 2023 delivery targets.

The order-to-bill ratio for the month was 2.3 by volume and 2.9 by value, reflecting the large inflow of orders during the month, while the cancellation rate relative to order inflow was 0%. This year’s book-to-bill ratio looks very strong, at 2.9 by volume and 3 by value. As I pointed out before, we are looking for bookings to billing ratios above 1, but even if this is achieved, these ratios should be placed in context, and it should be remembered that bookings are not taken into account in bookings – orders shipped The current demand for aircraft is higher than the ability to deliver these aircraft, and the aircraft delivery capacity can also store order-to-bill ratio data.

What is Airbus’s delivery target for 2023?

Airbus expects deliveries of about 720 aircraft in 2023, which is effectively the same as last year’s original target. The company will be able to meet its targets this year as supply chain restrictions ease, but it did indicate that planned capacity ramp-ups are delayed by at least a year. This delivery guidance is in line with my expectations for approximately 725 aircraft deliveries in 2023.

How do Airbus deliveries compare to Boeing?

Boeing Co (BA) delivered 38 aircraft in August, taking its total to 347 so far this year, according to preliminary data. Airbus delivered 52 aircraft, bringing the total to 433. Boeing’s deliveries were on par with Airbus’s at the start of the year, but the European jet maker is now in the lead due to temporary halts in some single-aisle deliveries.

Conclusion: Airbus stock is still a buy

Subsequently, Airbus’s order increase was mainly driven by orders from Wizzair. The increase compared with the same period last year was also driven by increased demand for aircraft as airlines queued up orders to meet future demand. Overall, Airbus still has a large order backlog for commercial aircraft, and as demand for commercial aircraft is high, pricing power on these sales is equally high, allowing Airbus to sell slots in advance and offer attractive prices. price. The bigger challenge appears to be increasing production in line with demand.

Affected by seasonal factors, delivery volume decreased month-on-month, but increased year-on-year. Deliveries so far this year are also up on last year, and Airbus should be able to meet its delivery targets. At the same time, we did find issues with the geared turbofan engines designed to power the Airbus A220 and the Airbus A320neo family engine options. Therefore, there are still challenges in increasing production to OEMs’ target levels, but I do believe Airbus SE stock remains a buy driven by long-term demand drivers.

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