Safran shares fall after in-line outlook, interiors weak despite strong Q3 beat

Investing.com -- Safran (EPA:SAF) shares traded lower Friday after the French aerospace supplier posted stronger-than-expected third-quarter results but kept its upgraded full-year guidance broadly in line with market expectations, while facing softness in its aircraft interiors business and a €100-150 million tariffs impact.

The company reported third-quarter sales of €7.85 billion, up 18.5% organically and 3% ahead of consensus. 

Propulsion remained the main growth driver, rising 25.6% organically and 21.1% as reported. 

Civil aftermarket activity continued to perform well, with spare parts revenue up 16.1% and services climbing 24.2%. 

Civil original equipment also advanced on a 40% increase in LEAP engine deliveries compared with a year earlier.

Military activity declined in the period, while helicopter revenue increased on stronger aftermarket demand. 

The Equipment and Defense division grew 11.7% organically and 18.9% as reported, helped by the integration of Collins Flight Controls, which added €296 million in scope. 

Aircraft Interiors rose 9.8% organically but came in 6% below consensus, as certification challenges in business-class seats led to a 28% drop in unit deliveries.

Safran raised its adjusted EBIT guidance to €5.1-5.2 billion from €5-5.1 billion, in line with the consensus estimate of €5.18 billion. 

Free cash flow guidance increased to €3.5-3.7 billion from €3.4-3.6 billion, with consensus at €3.52 billion. 

Revenue growth is now expected between 11% and 13%, slightly below the previous “low teens” range. 

The company maintained an assumed €380-400 million impact from the French corporate surtax and an average hedge rate of €/$ 1.12.

The forecast includes contributions from the recently acquired flight control and actuation activities, which added about €650 million in revenue and a mid-single-digit adjusted EBIT margin before separation and integration costs. The company said the addition has limited effect on the full-year EBIT outlook.

Safran raised its services growth assumption to the low-to-mid-twenties percent range, from mid-to-high teens, and kept its spare parts growth outlook unchanged at mid-to-high teens. Continued momentum in the CFM56 engine aftermarket supported the updated forecast.