Upside to Our Fair Value Estimate in Airbus’ 2022 Results and 2023 Outlook

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.

In the fourth quarter of 2022, we had expected Airbus to pull off delivering 260 aircraft, to round out the year with 700 jet deliveries, but the final tally came up 39 planes short. In CEO Guillaume Faury’s words, regarding the pace of ramping production and deliveries of Airbus commercial jets to desired monthly rates, “it will take us two years to achieve what we had planned to do in one.” The good news is Airbus is ramping up production of the very-sought-after narrow and widebody airliners that drive the business—the bad news is it can’t build them (or book revenue, and so on) fast enough. Supply chain woes continue to gum up the works and constrain the company’s ability to meet demand. We will incorporate more detailed forecasts into our valuation when Airbus files audited financials for 2022, but we see some upside to our fair value estimate because the long-term production and overall demand picture remains in place, notwithstanding the persistence, for now, of these supply chain constraints.

Further, the company re-estimated its ability to deliver A400M military transport planes, taking around a half a billion EUR charge against that program, and management noted that between sanctions on Russia (preventing use of Soyuz rockets), a failed launch in December, and delays in the Ariane rocket program, European space launches are stalled out for the time being.

However, more than 80% of the firm’s profits came from its main commercial aircraft segment over the last five years, and potentially more than 90% will do so in our forecast. Thus we focus on the secular demand for Airbus’ very successful lineup of airplanes, for which we continue to see robust demand for decades. The somewhat-more-gradual acceleration of deliveries will not slake airlines’ thirst for new planes.