The immediate future looks ‘brighter than ever’ for European aerospace giant Airbus, according to equity analysts at Barclays. The analysts’ estimate is based on European plane maker’s mature portfolio offering reliable cash flow over the next five years.
โCentral to our investment thesis on Airbus is our view that the scale and predictability of its FCF (free cash flow) is superior to Boeing, yet Airbus trades at a much larger than normal discount to Boeing,โ Barclays aerospace analysts said in a research note seen by CNBC.
The analysts have listed a price target of โฌ155 ($171) per share with an โoverweightโ rating. Airbus stock was priced at just over โฌ119 per share on the French CAC-40 Tuesday morning.
Boeingโs current share price is $372 and has risen nearly 16 percent year-to-date. Airbusโs range of jet planes is projected to โoutgrowโ Boeingโs by 2024.
Analysts explained that by pointing to the US plane makerโs grounded 737 MAX and the challenges faced in getting its new 777X into commercial service.
Airbusโs โmore matureโ product range could guarantee smoother income, Barclays said, adding that free cash flow could triple from last yearโs โฌ3 billion to around โฌ9 billion in 2024.
โThe cash flow profile at Airbus is now becoming more predictable and robust compared with that of Boeing,โ said the bank.
It has calculated that when the two rival companies are stripped back to their commercial airplane divisions, current share prices imply Airbus is valued at a โstrikingโ 45 percent discount to that of Boeingโs.
The discount is undeserved and doesnโt properly factor in Airbusโs share of the single-aisle jet market, said Barclays.
โWe estimate the present value of the total narrow-body industry at $238 billion, which implies that a 50/50 split is worth 140 euros per share to Airbus โ 20 percent above Airbusโ current share price.โ
It added Airbusโs popular A321 jets alone should contribute โฌ3.4 billion of free cash flow to the company over the next five years.