Canaccord Genuity’s analysts expect the two giant aircraft makers instead to focus on some of their key programs. If the rivals cannot offer nosebleed-level order numbers, then they will have to come up something else to generate excitement.
One expected announcement from Airbus is a timetable for increasing production of its single-aisle planes (A320 and A321) to 60 a month. The company has already announced an increase to 50 planes a month in the first quarter of 2017, and many analysts expect that number to rise to 60 in 2018.
For its part, Boeing is planning an increase in its 737 production to 52 in 2018, with a step up to 47 in 2017, from its current production rate of 42 planes a month. If Airbus does announce a jump to 60 planes a month, there will be pressure on Boeing to keep pace.
Canaccord Genuity also believes that Boeing will have to match a production rate of 60 narrow-body planes a month. The analysts note the importance of the 737 to a number of Boeing suppliers including Spirit AeroSystems Holdings Inc. (NYSE: SPR), which Canaccord’s analysts estimate will generate 49% of Spirit’s 2015 revenues and 75% of the supplier’s earnings per share (EPS). And that is at a rate of 42 planes a month. A jump to 52 a month boosts the 737’s impact on Spirit’s EPS by about 25%.
The 737 represents an estimated 21% of Boeing’s 2015 revenues and 42% of its estimated 2015 EPS. Revving up the program to 52 planes a month lifts the 737’s contribution to EPS from $3.69 in 2015 to $4.54, the analysts reckon.
Another program change that has been tossed around at Airbus is a new engine for its super-jumbo A380. There is essentially a single customer for the plane, Emirates, and even though the airline has said it would order another 200 of the planes if Airbus added a new engine, the company rejected the idea as recently as this week at the IATA meeting in Miami. The Dubai Airshow in November is a likelier venue for such an announcement, if one is going to be made.
As for Boeing, the company should try to sharpen its story on how it plans to manage the transition from the current version of the 777 to the new 777X. Last week the company admitted that the current production rate of 8.3 per month (100 per year) will drop in 2018 as the company “feathers in” the first of the new 777X models. Nothing Boeing has had to say about this is very satisfying to industry analysts.
Canaccord Genuity still rates Boeing as a Buy with a price target of $165. The analysts also put a Buy rating on Spirit AeroSystems, with a price target of $60.
Other Boeing suppliers rated by Canaccord include Precision Castparts Corp. (NYSE: PCP), with a Hold rating and price target of $230 a share; Rockwell Collins Inc. (NYSE: COL), with a Buy rating and a price target of $110; and TransDigm Group Inc. (NYSE: TDG), also rated as a Buy with a price target of $230.