The airline industry had a great 2023 as the post-pandemic surge continued and traffic almost fully recovered to the levels before the Covid outbreak, with carriers like Ryanair, Lufthansa and Delta reporting record summers. However, they may have a hard time expanding the momentum into 2024 with traffic almost fully restored, revenge travel seemingly over and elevated fare costs amidst high inflation and economic uncertainty.
“The battle between Airbus [Euronext:AIR] and Boeing NYSE:BA, the duopoly in airplane manufacturing, will also be closely watched,” said Nikos Tzarbouras, an analyst with broker FXCM. “Airbus has been ahead in deliveries since 2019, but its dominance could be challenged, as its US rival is making a comeback. The European aerospace conglomerate secured less than 100 orders in November’s Dubai Airshow, against nearly 300 of Boeing. It will be interesting to see if the Commercial Aircraft Corporation of China (COMAC) can pose a threat, with its recently launched C919 narrow-body.”
Airbus shares up +42% over two years
Airbus shares are currently up 42% over the last 24 months and investors in the stock have seen a gain of 11.09% in the last 12 months. Taking into account Airbus’ recent financial performance, the company’s stock seems to offer a promising investment opportunity in the aerospace sector. The recent financial results position the company within the top 30% of industrials firms, making it a significant outperformer in the European engineering sector. Specifically, Book Value Per Share (BVPS) and Total Common Equity overperformed relative to its peers in the market.
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Airbus provided guidance for the fourth quarter (2024), expecting revenue growth in the mid- to high-teens range, including a contribution of approximately $65 million to $70 million from the Triumph Product Support acquisition. Airbus anticipates adjusted operating margins of around 9% overall, reflecting the accretive impact of the Triumph acquisition. Additionally, the company expects net interest expense of approximately $18.5 million in Q4.
Airbus stock rates 77/100 when its core financial metrics are benchmarked against its closest peers in the aviation sector. This is an area of the market where there are quite a few high quality stocks currently available to investors. Boeing, however, is not one of them. Analysis provided through The Armchair Trader’s Data+ service shows Lockheed Martin and General Electric scoring well across the board a US engineering plays. These are also considered close peers of Airbus. Just by way of example, Data+ rates Lockheed Martin at 78/100.
Delays are hampering Boeing stock
Which brings us to Boeing. A series of high profile air disasters and safety incidents involving Boeing aircraft is continuing to undermine overall confidence in the company and is unfortunately feeding through into results. Boeing stock is trading down 17.05% over 24 months and has shed 14.75% in the last 12 months. Boeing only rates a 59/100 on Data+.
What is pushing the Boeing price down? There is a lot of negative news around Boeing but also some poor fundamentals coming through from its lastest figures. A core loss per share of $10.44, negative free cash flow of $2 billion and a $3bn charge on Boeing’s 777X and 767 programs are all acting as drags on the stock price. Other factors include delays in the 737 MAX program and delyas in the delivery of the 777X.
On the upside, Boeing finished the year with a major order in from Pegasus Airlines. This demonstrates there is still appetite for Boeing aircraft out there, but investors will be looking for the company to deliver on some major deals in 2025, ideally without further bad publicity. This could be a challenge for Boeing management.
Other points of light for Boeing include the potential sale of Boeing Digital Solutions, aka the Jeppesen navigation unit, which is attracting major aviation suppliers and private equity suitors ahead of the deadline for first-round bids next week. RTX Corporation and Honeywell International are said to be among the companies that have been evaluating Jeppesen. Boeing has also just completed a bond issue to the tune of $10 billion.