Thales stock jumps over 7% on strong H2 results, boosted by defence growth

Investing.com -- Thales (EPA:TCFP) on Tuesday delivered strong results for the second half of 2024, with performance driven largely by its defence segment. 

Shares of the French aerospace and defence company jumped by 7.9% at 04:13 ET (09:13 GMT).

The company’s revenue for the period stood at €11.08 billion, surpassing consensus estimates by 5%, while EBIT reached €1.32 billion, also exceeding expectations. 

The defence sector played a crucial role in this outperformance, posting a 23.9% organic growth rate in the fourth quarter and 13.3% for the full year, well ahead of initial guidance.

Jefferies analysts noted that free cash flow remained strong at €2 billion, coming in 17% above consensus estimates. 

The company’s proposed dividend of €3.7 per share exceeded market expectations, which had forecast a figure closer to €3.47. 

Meanwhile, Thales’ fiscal year 2025 EBIT guidance appeared conservative, falling at the lower end of projections and not yet accounting for potential increases in defence spending.

Order intake in the fourth quarter totaled €9.7 billion, bringing full-year figures to €25.3 billion, ahead of market consensus (€23.8 billion). 

The company’s book-to-bill ratio remained strong at 1.2x, signaling sustained demand across its business segments.

The aerospace division saw mixed results. While revenue growth was slightly weaker than anticipated in the second half, margins performed better than expected, reaching 7.8% despite continued challenges in the space business. 

Analysts flagged that Thales had previously forecast full-year losses of around €50 million in its space operations, but specifics on the segment’s performance remained limited. The avionics division, however, continued to generate strong double-digit margins.

In cybersecurity, organic growth reached 1.3% for the full year, aligning with Jefferies’ expectations, though total sales slightly missed projections. 

Nonetheless, margins remained in line with consensus estimates. Restructuring costs for the year totaled €118 million, in line with previous forecasts.

Thales’ 2025 guidance suggests organic growth of 5-6%, translating to revenue of €21.7-221.9 billion. At the midpoint, this represents a slight increase of 1% over consensus. EBIT margins are forecast at 12.2-12.4%, implying adjusted EBIT between €2.66 billion and €2.70 billion. 

This range falls at the lower end of analysts’ expectations. An estimated €1.91 billion in free cash flow will be generated, with a cash conversion rate of 95-100%.

Jefferies analysts pointed out that Thales’ investment plans for 2025 indicate an increase in capital expenditure, with net investments expected to slightly exceed €700 million. 

This is driven by efforts to expand production capacity in the defence segment, a move reflecting broader geopolitical trends and increased defence spending across Europe. 

However, the company’s guidance does not yet fully reflect potential acceleration in defence budgets, leaving room for upward revisions.