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On Friday, Citi analysts downgraded Airbus stock (AIR:FP) (OTC:EADSY) from Buy to Neutral, adjusting the price target to €183 from €209. The decision was influenced by the company’s exposure to Euro/US dollar exchange rates. The aerospace giant, with a market capitalization of $148.5 billion and trailing twelve-month revenue of $75.7 billion, currently trades at a P/E ratio of 29.5x. According to InvestingPro, this represents a premium valuation relative to near-term earnings growth.
The analysts noted that Airbus faces substantial Euro/US dollar transaction exposure due to its significant Euro costs and predominantly US dollar sales. While hedging mitigates this in the short term, currency fluctuations remain a fundamental factor affecting the company’s valuation. Despite these challenges, InvestingPro data shows the company maintains strong financial health with a GOOD overall rating, supported by robust cash flow metrics and a solid balance sheet.
Citi’s previous target price of €209 was based on a Euro/US dollar spot rate of 1.05. With the current rate at 1.14, the analysts revised the target price to €183, citing insufficient upside to maintain a Buy rating.
The analysts estimate that each 1 cent weakening of the US dollar could decrease Airbus’s fair value by €3-3.5 per share. They base their valuation on the current spot rate plus a three-year forward spread, consistent with Airbus’s typical hedging strategy.
This adjustment reflects the ongoing impact of currency exchange rates on Airbus’s financial outlook, as noted by Citi in their recent analysis. The company offers a dividend yield of 1.38% and has demonstrated consistent dividend growth over the past four years. For deeper insights into Airbus’s financial metrics and additional analysis tools, investors can access more features on InvestingPro.
In other recent news, Airbus SE has been the subject of several significant developments. Fitch Ratings upgraded Airbus’s Long-Term Issuer Default Rating to ’A’ from ’A-’, citing expected improvements in operating profitability and free cash flow. Airbus’s strong market position in commercial aerospace, along with a robust order backlog, supports this positive outlook. Additionally, Berenberg analysts upgraded Airbus’s stock rating from Sell to Hold, adjusting the price target to EUR140. This change reflects a reassessment of Airbus’s future performance and market expectations.
Meanwhile, RBC Capital Markets maintained its Outperform rating on Airbus, with a price target of €185.00, highlighting the company’s potential benefits from increased defense spending in Europe. Discussions are also ongoing for a major order from China, potentially for 200 to 500 airplanes, which could be announced at the upcoming Air Show. This order would further solidify Airbus’s presence in the Chinese market. Furthermore, Japan Airlines announced plans to expand its fleet with additional Airbus orders, including 11 Airbus A321neo aircraft and 20 Airbus A350-900 planes, as part of its modernization strategy. These recent developments underscore Airbus’s strategic initiatives and its position in the aerospace industry.
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