MTU Aero Engines AG's (ETR:MTX) CEO Compensation Looks Acceptable To Us And Here's Why

Key Insights

• MTU Aero Engines' Annual General Meeting to take place on 8th of May
• CEO Lars Wagner's total compensation includes salary of €1.0m
• The total compensation is similar to the average for the industry
• Over the past three years, MTU Aero Engines' EPS fell by 5.1% and over the past three years, the total shareholder return was 15%

The share price of MTU Aero Engines AG (ETR:MTX) has been growing in the past few years, however, the per-share earnings growth has been lacking, suggesting something is amiss. Some of these issues will occupy shareholders' minds as the AGM rolls around on 8th of May. One way that shareholders can influence managerial decisions is through voting on CEO and executive remuneration packages, which studies show could impact company performance. From what we gathered, we think shareholders should be wary of raising CEO compensation until the company shows some marked improvement.

View our latest analysis for MTU Aero Engines

Comparing MTU Aero Engines AG's CEO Compensation With The Industry

According to our data, MTU Aero Engines AG has a market capitalization of €12b, and paid its CEO total annual compensation worth €3.0m over the year to December 2023. That's a notable increase of 32% on last year. While we always look at total compensation first, our analysis shows that the salary component is less, at €1m.

On comparing similar companies in the German Aerospace & Defense industry with market capitalizations above €7.5b, we found that the median total CEO compensation was €2.9m. So it looks like MTU Aero Engines compensates Lars Wagner in line with the median for the industry.

Component	2023	2022	Proportion (2023)
Salary	€1m	€600k	33%
Other	€2.0m	€1.7m	67%
Total Compensation	€3.0m	€2.3m	100%

Talking in terms of the broader industry, salary and other compensation roughly make up 50% each, of the total compensation. In MTU Aero Engines' case, non-salary compensation represents a greater slice of total remuneration, in comparison to the broader industry. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.

A Look at MTU Aero Engines AG's Growth Numbers

Over the last three years, MTU Aero Engines AG has shrunk its earnings per share by 5.1% per year. In the last year, its revenue changed by just 0.6%.

Few shareholders would be pleased to read that EPS have declined. And the flat revenue hardly impresses. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. Historical performance can sometimes be a good indicator on what's coming up next but if you want to peer into the company's future you might be interested in this free visualization of analyst forecasts.

Has MTU Aero Engines AG Been A Good Investment?

MTU Aero Engines AG has served shareholders reasonably well, with a total return of 15% over three years. But they probably don't want to see the CEO paid more than is normal for companies around the same size.

To Conclude...

Despite the positive returns on shareholders' investments, the fact that earnings have failed to grow makes us skeptical about whether these returns will continue. Shareholders should make the most of the coming opportunity to question the board on key concerns they may have and revisit their investment thesis with regards to the company.

Whatever your view on compensation, you might want to check if insiders are buying or selling MTU Aero Engines shares (free trial).

Of course, you might find a fantastic investment by looking at a different set of stocks. So take a peek at this free list of interesting companies.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.