Airbus And Boeing Production Will Fuel Expanding Aerospace Opportunities

Key Takeaways

• Refocus on higher-margin engineered components and investments in advanced manufacturing should drive margin expansion and long-term profitability.
  
• Strengthened position in aerospace, defense, and electrified vehicle markets diversifies revenue streams, supporting resilience and above-market growth.
  
• Heightened reliance on aerospace and cyclical markets, divestment-driven concentration, and persistent supply chain, regulatory, and electrification pressures threaten margin stability and long-term cash flow.

Catalysts

Designs, manufactures, and sells high-technology components and systems for the original equipment manufacturers in the aerospace, defense, land vehicle, and power and energy markets in North America, the United Kingdom, South Africa, India, China, and internationally.

• Senior's specialization in lightweight fluid conveyance and thermal management systems positions it to benefit from accelerating demand for fuel-efficient, lower-emission aerospace components as airlines and OEMs respond to stricter environmental regulations. This is likely to drive sustained organic revenue growth and increase the company's addressable market over the coming years.
  
• Continued ramp-up in global aircraft production-highlighted by Airbus and Boeing targeting record build rates through the remainder of the decade-offers substantial volume tailwinds for Senior's aerospace division, supporting higher top-line growth and operating leverage, which should translate into expanding margins and improved profitability.
  
• The divestiture of the Aerostructures business and the resulting transformation into a pure-play higher-margin engineered components supplier enables Senior to redeploy capital, focus on value-add segments, and prioritize investment in advanced manufacturing and R&D. This structural rebalance sets the stage for margin expansion and higher return on capital employed in the medium term.
  
• Senior's strong order momentum in both aerospace (notably with Spencer's product introduction pipeline and entry into Europe) and defense, as well as its increasing exposure to the rapidly growing semiconductor equipment and electrified vehicle cooling markets, are expected to support above-market revenue growth and diversify earnings streams, increasing resilience and long-term earnings visibility.
  
• Robust balance sheet improvement following debt reduction and a focused capital allocation policy-targeting bolt-on M&A within core growth areas and returning excess cash to shareholders-should further boost shareholder returns, support EPS growth, and reduce financial risk, potentially narrowing the current valuation gap.

Senior Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Senior's revenue will decrease by 6.1% annually over the next 3 years.
• Analysts assume that profit margins will increase from 3.2% today to 6.0% in 3 years time.
• Analysts expect earnings to reach £49.0 million (and earnings per share of £0.11) by about August 2028, up from £31.3 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as £42.3 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 23.9x on those 2028 earnings, down from 25.7x today. This future PE is lower than the current PE for the GB Aerospace & Defense industry at 25.0x.
• Analysts expect the number of shares outstanding to grow by 0.12% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.47%, as per the Simply Wall St company report.

Senior Future Earnings Per Share Growth

Risks

• Senior's increasing reliance on civil aerospace (now 32% of group revenue and a key focus area post-Aerostructures divestment) exposes the business to risks from long-term stagnation or structural decline in commercial air travel due to future sustainability regulation, changing business travel habits, or disruptive transport technologies-negatively impacting revenue growth.
  
• Divesting the Aerostructures division removes a source of future diversification and cash flow, increasing dependence on more cyclical and potentially slower-growing Fluid Conveyance and Thermal Management (FCTM) end markets; this elevates earnings volatility and raises risk to long-term free cash flow and dividend sustainability.
  
• While the company is benefiting from ongoing aerospace recovery, persistent supply chain disruptions (notably in engine and component delivery at OEMs like Airbus and Boeing) may continue delaying production normalization, potentially leading to uneven revenue recognition and weakening net margins if underutilized capacity persists.
  
• Senior's exposure to cyclical land vehicle, power, and energy sectors (comprising 43% of continuing operations) combined with the ongoing global transition to electrification and alternative propulsion could accelerate revenue erosion from internal combustion-related programs, especially if adoption rates for EVs or regulatory changes outpace the company's niche innovation efforts, risking long-term revenue and margin decline.
  
• Increasing deglobalization, tariff volatility, and regulatory scrutiny-although described as manageable currently-remain medium
• and long-term hazards that could raise input costs, reduce pricing power during renewals, or demand substantial compliance/capex investments, thereby squeezing net margins and curtailing earnings growth over time.

Valuation

• The analysts have a consensus price target of £2.238 for Senior 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 £2.75, and the most bearish reporting a price target of just £1.85.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be £816.5 million, earnings will come to £49.0 million, and it would be trading on a PE ratio of 23.9x, assuming you use a discount rate of 8.5%.
• Given the current share price of £1.97, the analyst price target of £2.24 is 12.0% higher.
• 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.