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Could Airbus shares climb higher after posting record profits?

Airbus has reinstated its dividend and posted upbeat earnings guidance for 2022. Are the shares a buy?

Airbus Group NV (FR) reported record profits this week and has reinstated its dividend payments as a sign of confidence. Shares in the European aircraft and helicopter manufacturer, which have performed strongly this year, dipped 1% to €116.32.

The company formerly known as EADS and listed on the Euronext and Frankfurt exchanges said that net income rose to €4.2bn from a €1.1bn loss in 2020. The dividend payment announced of €1.50 a share marks the first time in two years that the defence contractor and aviation specialist has paid out to shareholders.

“The strong financials reflect the higher number of commercial aircraft deliveries, the good performance of our Helicopters and Defence and Space businesses as well as our efforts on cost containment and competitiveness,” chief executive Guillaume Faury told investors. “Record net income and our efforts to strengthen the net cash position underpin our proposal to reintroduce dividend payments going forward. At the same time, we continue to invest in our strategic priorities and in the transformation of our company.”

Consolidated revenues rose 4% to €52.1bn from €49.9bn in 2020, boosted by an increased number of commercial aircraft deliveries compared to the previous year but were hit by currency fluctuations. Airbus delivered 611 aircraft in 2021 and expects to deliver 720 in 2022, while the helicopter division booked 414 net orders, including 30 of the first batch of H160M military units for France’s Joint Light Helicopter Programme.

Cash generation was also strong, with free cash flow of €3.5bn for 2021 compared to an outflow of €7.4bn the previous year. The company’s net cash position at the year-end was €7.6bn, up over 75%, while the consolidated order book stood at a healthy €398bn at the year-end. Ceasing the A380 programme also boosted earnings.

Airbus unveils upbeat earnings guidance

The company anticipates delivering adjusted EBIT (earnings before interest and taxation) of €5.5bn for the full-year 2022. Some analysts were disappointed that Airbus’ flat free cash flow guidance of €3.5bn for 2022, before customer financing and mergers and acquisitions, is the same as that delivered last year. While analysts at Jefferies noted that "conservatism is typical" for the first forecast of the year, they pointed out that this jarred with the higher earnings and delivery figures anticipated.

Supply chain headwinds

It’s not all plane sailing for the aircraft maker. Airbus faces some supply chain issues with manufacturers, including a shortage of workers and materials, and is dealing with a lawsuit from customer Qatar Airways over its A350 aircraft, which CEO Guillaume Faury is currently trying to resolve.

The shares are up 23% this year to €116.32 and have doubled since plummeting to €56.52 in May 2020 at the height of the first Covid lockdown, but are still some way from their highs of €139 seen in January 2020. Analysts at Barclays recently set a €140 price target. With continuing concerns over the possibility of war in the Ukraine and the Covid recovery in the travel sector, the shares are worth buying.

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This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

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