Airbus Earnings Please Investors, but Legal Risks Loom

October 31, 2017 by Paul Ausick

Source: Wikimedia Commons
European aircraft maker Airbus reported third-quarter and nine-month 2017 results Tuesday morning and the news was almost uniformly weak. The company’s revenues for the first three-quarters of the year totaled €43 billion, essentially flat year over year (€1 = $1.16). That was the better news.

The company’s ongoing issue is continuing investigations in the United Kingdom and France, and, now, the United States, related to its sales practices. The investigations are focused on bribery charges in the European commercial business and the U.S. defense business. Depending on the outcome of these investigations, Airbus warns of a “material impact on the financial statements, business and operations” of the company.

Adjusted EBIT in the first nine months of the year totaled €1.8 billion, a drop of 25% year over year, and adjusted net income rose 2.2% to €1.85 billion. For the first three-quarters of 2017, Airbus has taken €150 million in charges on its A400M military transport, which the company can add to a charge in the fourth quarter of 2016 totaling €2.2 billion. The company added €80 million to the charges in the third quarter alone. Year to date, earnings per share (EPS) rose 1.7% to €2.39.

The company has taken 271 net orders for new commercial jets so far in 2017, down 29% compared with 380 net orders in the same period a year ago. Total backlog at the end of September was 6,691 aircraft.

In the first nine months of the year, the value of the company’s order book dropped nearly 11%, from €1.06 trillion to €945 billion, and net cash slipped by nearly 40% to €6.7 billion.

For the third quarter, net income rose nearly 600% and EPS rose by 650% to €0.45. The company sold its Defence Electronics business for $650 million in the quarter. Adjusted EBIT slipped 4% to €697 million.

For the first nine months of the year, Airbus delivered a total of 454 commercial aircraft, down slightly from 462 in the same period last year. The firm delivered 350 A320 family jets, 50 A350 XWBs, 45 A330s and nine A380s.

In its outlook statement, Airbus said it expects to deliver more than 700 aircraft in 2017, provided engine makers meet their commitments, a reference to the problems Pratt & Whitney has had with the A320neo engine. The company also expects mid-single-digit growth in adjusted EBIT and EPS and free cash flow similar to 2016.

Shares of Airbus traded up about 4.2% in Paris Tuesday, at €88.25 in a 52-week range of €51.00 to €$88.56. The high was posted earlier today. The 12-month price target on the stock is €87.67.