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Investing.com -- Airbus Group (EPA:AIR) shares were trading sideways in European trading Thursday, as UBS flagged “weak” second-quarter deliveries and a potentially backloaded 2025 for the European planemaker.
The bank estimates 167 aircraft deliveries for the second quarter, down 8% year-over-year, and expects adjusted EBIT margins in the commercial division to drop to 10.9% from 12% last year.
A notable drag came from the A320neo family, with deliveries estimated to be down by 20 units versus the prior year, even though A320neo variants remained flat.
While UBS maintains its full-year delivery guidance, it cautioned that this assumes a significant ramp-up in CFM engine deliveries during the second half of the year.
“We continue to model deliveries below guidance as we see risk to the assumption that CFM deliveries will increase materially in H2,” analyst Ian Douglas-Pennant wrote, though he views the likelihood of a guidance downgrade at the Q2 results on July 30 as “very low.”
Despite the delivery softness, Douglas-Pennant expects Airbus to generate €1 billion in free cash flow for the quarter, helped by customer deposits following around 250 aircraft orders at the Paris Air Show.
“Pre-Delivery Payments (PDPs) should provide some support for cash flow in the quarter despite weak deliveries and likely continued inventory build related to glider production,” the note said.
Foreign exchange (FX) volatility was also raised as a concern among investors, but UBS noted that about 85% of Airbus’ near-term currency exposure is hedged, limiting the likely impact from recent euro-dollar fluctuations.
UBS lifted its 12-month price target from €155 to €175, citing minor model changes including currency assumptions and seasonality.
The stock closed at €175.18 on July 2, leaving limited implied upside.
UBS maintained a Neutral rating on the stock.