AIR: Delivery Challenges And Order Trends Will Shape Performance Through 2030

Key Takeaways

• Rising global demand, sustainability focus, and airline fleet modernization drive strong aircraft sales, margin expansion, and long-term backlog growth.
  
• Diversified growth in defense, space, and aftermarket services enhances earnings potential and operational efficiency through ongoing strategic investments.
  
• Ongoing supply chain and supplier acquisition challenges, high inventories, and external risks threaten Airbus's production ramp-up, cost control, and future earnings stability.

Catalysts

Engages in the design, manufacture, and delivery of aeronautics and aerospace products, services, and solutions worldwide.

• Sustained growth in global air travel, particularly from emerging markets and rising middle-class populations, continues to drive robust order intake and long-term backlog growth for Airbus, supporting higher potential future revenues and operational leverage.
  
• Airline fleet replacement cycles are accelerating due to increased prioritization of newer, fuel-efficient, and lower-emission aircraft; this supports higher demand for the A320neo family and other next-generation models, with positive implications for both revenue growth and margin expansion as product mix shifts.
  
• Structural industry shift toward decarbonization and sustainability aligns with Airbus's portfolio and ongoing R&D investments, positioning the company to capture outsized share of new and replacement demand as environmental pressures mount, likely supporting higher net margins over time.
  
• Expansion in the defense and space segments, underpinned by rising European defense budgets (e.g., post-NATO summit commitments), ongoing strategic transformation, and growing demand for UAVs and advanced military aircraft, enhances earnings growth potential and diversifies revenue streams.
  
• Continued investments in automation, digitalization, and ramp-up of higher-margin aftermarket services businesses set the stage for cost efficiencies, improved recurring revenue, and higher overall net margins moving forward.

Airbus Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Airbus's revenue will grow by 12.1% annually over the next 3 years.
• Analysts assume that profit margins will increase from 7.0% today to 8.0% in 3 years time.
• Analysts expect earnings to reach €7.9 billion (and earnings per share of €10.17) by about September 2028, up from €4.9 billion today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting €8.7 billion in earnings, and the most bearish expecting €6.1 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 23.8x on those 2028 earnings, down from 29.6x today. This future PE is lower than the current PE for the GB Aerospace & Defense industry at 32.9x.
• Analysts expect the number of shares outstanding to grow by 0.1% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.17%, as per the Simply Wall St company report.

Airbus Future Earnings Per Share Growth

Risks

• Persistent supply chain vulnerabilities-particularly with engine suppliers (CFM, Pratt & Whitney) and critical component providers like Spirit AeroSystems-have already resulted in significant delivery delays, production of gliders (completed aircraft missing engines), and elevated inventories. If unresolved or recurring, these issues could continue to constrain Airbus's ability to ramp up production, reducing revenue growth and pressuring free cash flow and margins.
  
• Ongoing delays in closing critical supplier acquisitions, such as Spirit AeroSystems, due to regulatory and antitrust approvals, create risk around integrating key work packages and securing future production resilience; this uncertainty may disrupt operational planning, increase costs, and negatively affect overall earnings visibility.
  
• Inventory levels and working capital requirements remain elevated and are expected to remain so until a fully stable rate of production is achieved-prolonged higher inventory ties up cash, exposes Airbus to additional holding costs, and introduces risk should market demand or supply chain conditions deteriorate, ultimately impacting free cash flow and net earnings.
  
• The ramp-up to higher production rates (e.g., 75 A320s/month by 2027) is heavily dependent on engine manufacturers' capacity and reliability; any misalignment between Airbus's plans and its suppliers' ability to deliver-notably amid existing industrial and technical challenges in the engine sector-could threaten both revenue targets and margin improvement initiatives.
  
• The broader macroeconomic and geopolitical environment, including the potential for renewed tariffs, strikes (e.g., U.K. wing factories), and continued stress on the aviation supply chain, introduces external risks that may disrupt operations, increase costs, and cause order or delivery delays, putting future earnings and cash flow at risk.

Valuation

• The analysts have a consensus price target of €197.105 for Airbus based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €244.0, and the most bearish reporting a price target of just €140.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €98.7 billion, earnings will come to €7.9 billion, and it would be trading on a PE ratio of 23.8x, assuming you use a discount rate of 6.2%.
• Given the current share price of €184.7, the analyst price target of €197.11 is 6.3% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.