Yahoo Finance Bear of the Day: Airbus Group (EADSY)
Zacks Rank #5 (Strong Sell) stock Airbus Group (EADSY) is a leading airplane manufacturer headquartered in the Netherlands. The massive multinational aerospace company focuses on designing and manufacturing commercial aircraft. However, Airbus has smaller business divisions, which include segments such as defense, space, and a helicopter division. Airbus is the world’s second largest commercial airplane manufacturer, only behind U.S. airplane manufacturing juggernaut Boeing (BA), which Airbus enjoys a duopoly with.
Airbus Slashes Guidance
Late last month, Airbus unexpectedly cut 2024 guidance and lowered its financial targets for the year, blaming supply chain issues and increased costs. Earlier in the year, the company projected earnings before expenses like interest and taxes would be ~$7 billion. However, the company projects adjusted earnings will fall short of $6 billion, and it will deliver fewer commercial airplanes than expected.
The shot of lousy news adds to the company’s already troubling earnings surprise trend. Airbus has missed Zacks Consensus Estimates for three of the past four quarters.
Image Source: Zacks Investment Research
Faltering Despite Boeing Woes
Boeing, Airbus’s largest competitor, has experienced a plethora of recent safety scares, including a tire that fell off a United Airlines (UAL) plane during takeoff and two violent turbulence episodes that resulted in an unfortunate death. Nevertheless, despite a Department of Justice (DOJ) investigation and a tarnished reputation, Airbus has not been able to seize on the opportunity, a troubling sign.
China Competition Heating Up
As I mentioned previously, Boeing and Airbus are the two most prominent airline manufacturers worldwide. Until recently, breaking into the airline market was too difficult and had to many barriers of entry. However, the Commercial Aircraft Corporation of China (COMAC), a state-owned aerospace manufacturer, sees the crisis in Boeing and Airbus as an opportunity. While Boeing and Airbus face supply chain issues and continue to have massive delays in meeting their backlog demands, COMAC is looking to vie for the single-aisle segment of the commercial airplane market. Though COMAC is unlikely to upstage the big two, its near-unlimited funding makes it a formidable competitor to at least put a dent in earnings.
Relative Weakness
EADSY is severely underperforming the S&P 500 Index and is red for the year while the S&P is up 25% - a sign of relative weakness.
Image Source: Zacks Investment Research
Bottom Line
Airbus cannot gain traction in the airline industry even though Boeing, its main competitor, has suffered a string of safety issues and a tarnished reputation. Meanwhile, China’s state-owned airplane manufacturer threatens to grab a slice of the market.
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