Thales lifts sales outlook after margin beat in Aerospace

Investing.com -- Thales (EPA:TCFP) on Wednesday raised its full-year organic sales growth guidance after reporting stronger-than-expected earnings for the first half of 2025, supported by margin expansion in its Aerospace division and a jump in order intake.

The French company now expects full-year organic sales growth of 6% to 7%, up from a prior range of 5% to 6%. 

The revised forecast implies total sales between €21.8 billion and €22 billion, compared with a previous projection of €21.7 billion to €21.9 billion. 

The new outlook aligns with consensus expectations at the midpoint and is 1% above Jefferies estimates.

Thales said adjusted EBIT reached €1.25 billion in the first half, which was 2% above consensus, helped by a 270 basis-point margin increase in Aerospace to 9.1%. 

The Aerospace division exceeded expectations by 15%, with EBIT reaching €252 million. Restructuring costs rose to €55 million from €32 million in the same period a year earlier.

Second-quarter order intake rose 15% year over year to €6.6 billion, including five large orders totaling €2.2 billion. 

Total (EPA:TTEF) orders for the half-year declined 4% to €10.4 billion, which was less than expected. The book-to-bill ratio remains guided at above 1x.

Revenue for the first half came in at €10.27 billion, down 1% from consensus and slightly below company expectations. 

Defense revenues rose 12.7% organically in the first half, with second-quarter growth at 10.6%. Aerospace revenue increased 5.8% over the half and 3.5% in the quarter. 

The Cyber & Digital Identity segment declined 1.9%, including a 7% drop in Cyber, though Digital returned to growth at 1.8%.

Free cash flow reached €499 million, well ahead of forecasts. The performance was supported by working capital developments.

“We assume this reflects the Rafale order down payment, which also appeared to boost Dassault Aviation’s H1 FCF performance,” said analysts at Jefferies in a note.

“We also note that despite a significant increase in P&L income tax (€277m, vs. €193m in H1 24; including a €60m French tax surcharge), this did not trigger a meaningful increase in income tax paid in the period (€71m vs €54m),” the brokerage added.

Guidance for the adjusted EBIT margin remains unchanged at 12.2% to 12.4%, translating to implied EBIT of €2.66 billion to €2.73 billion. Free cash flow conversion is also maintained between 95% and 100%. 

Thales said its outlook is based on a euro-to-dollar exchange rate of 1.17 for the second half. 

The company also stated that the forecast assumes reciprocal tariffs of 10% in Europe and 25% in Mexico, with no retaliatory measures from Europe.