The immediate future looks ‘brighter than ever’ for European aerospace giant Airbus, according to equity analysts at Barclays. The analysts’ estimate is based on European plane maker’s mature portfolio offering reliable cash flow over the next five years.
“Central to our investment thesis on Airbus is our view that the scale and predictability of its FCF (free cash flow) is superior to Boeing, yet Airbus trades at a much larger than normal discount to Boeing,” Barclays aerospace analysts said in a research note seen by CNBC.
The analysts have listed a price target of €155 ($171) per share with an “overweight” rating. Airbus stock was priced at just over €119 per share on the French CAC-40 Tuesday morning.
Boeing’s current share price is $372 and has risen nearly 16 percent year-to-date. Airbus’s range of jet planes is projected to “outgrow” Boeing’s by 2024.
Analysts explained that by pointing to the US plane maker’s grounded 737 MAX and the challenges faced in getting its new 777X into commercial service.
Airbus’s “more mature” product range could guarantee smoother income, Barclays said, adding that free cash flow could triple from last year’s €3 billion to around €9 billion in 2024.
“The cash flow profile at Airbus is now becoming more predictable and robust compared with that of Boeing,” said the bank.
It has calculated that when the two rival companies are stripped back to their commercial airplane divisions, current share prices imply Airbus is valued at a “striking” 45 percent discount to that of Boeing’s.
The discount is undeserved and doesn’t properly factor in Airbus’s share of the single-aisle jet market, said Barclays.
“We estimate the present value of the total narrow-body industry at $238 billion, which implies that a 50/50 split is worth 140 euros per share to Airbus — 20 percent above Airbus’ current share price.”
It added Airbus’s popular A321 jets alone should contribute €3.4 billion of free cash flow to the company over the next five years.
