Company Reports

Boeing will take over Spirit Aero Systems later in 2024, exchanging between .18 and .25 shares of its stock per outstanding share of Spirit Aero, depending on the market price of Boeing shares in the weeks preceding the deal's closing. Their agreement values Spirit Aero at $37.25 per share, a $6.25 premium to our fair value estimate. We see the price as justifiable on two grounds: 1) as an all-stock deal, Spirit shareholders may warrant some compensation for interim uncertainty about the value of the currency they are accepting; 2) but more importantly, Spirit will be worth more as part of Boeing than as a standalone enterprise.

Airbus updated its 2024 guidance on June 24, lowering its 2024 jet production goal to 775 from 800, shifting the timeline it expects to be able to produce 75 A320s per month to 2027 from 2026, and announcing a EUR 900 million charge in its defense communications business. None of these changes made a significant impact on our fair value estimates—which had incorporated slightly more conservative assumptions than management's previous guidance—that remain at EUR 163 per share and $43.80 per US depository share.

Airbus primarily generates revenue by manufacturing commercial aircraft. It benefits immensely from being in a duopoly with Boeing in the market for aircraft 130 seats and up; the companies act as a funnel through which practically all such commercial aircraft demand must flow. This allows both companies to actively manage their order backlogs to reduce cyclicality, despite the intense cyclicality of their customer base.

Wide-moat Airbus reported its first-quarter 2024 results, having delivered 124 commercial planes in the quarter, 20% of its 2024 goal of around 800 jets. Revenue and profits came in just a touch lower than our initial projections, and with the time value of money offset by a scaled-back delivery target for A321s in the year, we raised our fair value estimate from EUR 162 to EUR 163 per share and lowered it from $44 to $43.80 per US depository share because the dollar strengthened slightly since our last update.

Airbus primarily generates revenue by manufacturing commercial aircraft. It benefits immensely from being in a duopoly with Boeing in the market for aircraft 130 seats and up; the companies act as a funnel through which practically all such commercial aircraft demand must flow. This allows both companies to actively manage their order backlogs to reduce cyclicality, despite the intense cyclicality of their customer base.

Reports that Boeing is in talks to acquire Spirit AeroSystems make eminent sense to us. We are maintaining our $31 fair value estimate for Spirit until we learn more about the contours of a possible deal.

Airbus primarily generates revenue by manufacturing commercial aircraft. It benefits immensely from being in a duopoly with Boeing in the market for aircraft 130 seats and up; the companies act as a funnel through which practically all such commercial aircraft demand must flow. This allows both companies to actively manage their order backlogs to reduce cyclicality, despite the intense cyclicality of their customer base.

Wide-moat Airbus reported its 2023 results, surpassing its goal of delivering 720 aircraft in the year by 15 planes.

Neither the inferno of the Airbus A350 operating as Japan Airlines Flight 516 nor the fuselage panel failure on the Boeing 737 MAX 9 for Alaska Airlines Flight 1282 during the first week of 2024 resulted in serious injury to passengers or crew. This is due to safety features built into commercial airplanes that add to the complexity and cost of manufacturing but are obviously worthwhile to protect lives. Investors in Boeing and Airbus bank on the companies' long-term durability and safety records and ongoing obligation to adhere to the strictest product governance standards to meet safety requirements. The fatal crashes of two Boeing 737 MAX 8 aircraft in 2018 and 2019 had serious consequences for Boeing, including the grounding of the entire 737 MAX fleet by global aviation regulators for nearly two years, because they called into question Boeing’s ability to fulfill its product governance commitment.

Wide-moat Airbus reported its third-quarter 2023 results, sticking to its goal of delivering 720 narrow-body jets this year, with 161 left to go in November in December, which seems achievable.

Airbus primarily generates revenue by manufacturing commercial aircraft. It benefits immensely from being in a duopoly with Boeing in the market for aircraft 130 seats and up; the companies act as a funnel through which practically all such commercial aircraft demand must flow. This allows both companies to actively manage their order backlogs to reduce cyclicality, despite the intense cyclicality of their customer base.

Wide-moat Airbus reported its second-quarter 2023 results, sticking to its goal of delivering 720 narrow-body jets this year. At the halfway mark, Airbus delivered 316 planes, putting it on pace for a busy autumn and within reach of the goal.

Airbus primarily generates revenue by manufacturing commercial aircraft. It benefits immensely from being in a duopoly with Boeing in the market for aircraft 130 seats and up; the companies act as a funnel through which practically all such commercial aircraft demand must flow. This allows both companies to actively manage their order backlogs to reduce cyclicality, despite the intense cyclicality of their customer base.

Airbus primarily generates revenue by manufacturing commercial aircraft. It benefits immensely from being in a duopoly with Boeing in the market for aircraft 130 seats and up; the companies act as a funnel through which practically all such commercial aircraft demand must flow. This allows both companies to actively manage their order backlogs to reduce cyclicality, despite the intense cyclicality of their customer base.

Wide-moat Airbus reported its first-quarter 2023 results, sticking to its goal of delivering 720 jets this year. We will monitor those deliveries closely in coming months as the path Airbus must take to increase its production rates has narrowed with time and with just 127 planes out the door so far this year, Airbus is only 17.6% of the way to reach its annual deliveries target. Although the company failed to reach a similar goal last year (missing it by 39 planes) because of persistent supply chain issues, we will for the time being give the team benefit of the doubt as the company has a historical pattern of backloading its jet deliveries (and commensurate revenue and profit): in the first quarter of the three years through 2019, Airbus booked just under 17% of eventual annual commercial aircraft revenue.

Airbus primarily generates revenue by manufacturing commercial aircraft. It benefits immensely from being in a duopoly with Boeing in the market for aircraft 130 seats and up; the companies act as a funnel through which practically all such commercial aircraft demand must flow. This allows both companies to actively manage their order backlogs to reduce cyclicality, despite the intense cyclicality of their customer base.

Wide-moat Airbus reported 2022 results, with some good news and bad; we expect to raise our fair value estimate between 5% and 10% after reviewing the financials more closely.

We've maintained our EUR 149 per-share fair value estimate for Airbus ($38 for the U.S.-listed ADRs) following its third-quarter earnings release. Results were very consistent with our expectations and management reaffirmed its outlook. The company delivered 435 planes through September this year, leaving at least 260 to meet the 2022 goal of around 700. Though it will make for a very busy last few months, we think they can likely pull it off because these planes are in or nearing the very final stages of production and testing. Further, the company has a pattern of somewhat back-loaded deliveries and revenue in past years.

We have reviewed recent performance at Airbus and monitored the rebound in air travel since the COVID-19 pandemic decimated airline revenue and jet deliveries. We've increased our fair value estimate by EUR 1 to EUR 149 (that is $38 for the U.S.-listed ADRs) and we are maintaining Airbus' wide economic moat and positive moat trend ratings.

Airbus primarily generates revenue by manufacturing commercial aircraft. It benefits immensely from being in a duopoly with Boeing in the market for aircraft 130 seats and up; the companies act as a funnel through which practically all such commercial aircraft demand must flow. This allows both companies to actively manage their order backlogs to reduce cyclicality, despite the intense cyclicality of their customer base.