Airbus downgraded due to execution risks in A320 and A350 projects

2026-02-24 04:27:20

Investing.com - Rothschild Redburn has downgraded Airbus Group to Neutral, citing that the execution risks of the A320neo and A350 programs outweigh the strong industry demand.

The broker has lowered its target price from €230 to €200.

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Although there are no concerns about demand and the Airbus-Boeing duopoly is unlikely to face credible competitive threats in the next decade, recent operational setbacks—including quality issues with fuselage panels in December and supply shortages affecting PW1100G geared turbofan engines—have cast a shadow over the outlook for 2026 and 2027.

Airbus has guided for approximately 870 deliveries in 2026 and plans to increase the production rate of the A320 family to 70-75 aircraft per month by the end of 2027.

Rothschild Redburn’s forecast for 2026 deliveries is 872 aircraft, roughly in line with the guidance but below the previous buyer expectation of about 880 aircraft.

The broker states that the ramp-up of A320 capacity still carries risks. It points out that engine supplier Pratt & Whitney has not made clear commitments and warns that the supply chain has never maintained the higher production rates currently set. The broker believes that it is unlikely the program will reach a monthly rate of 75 aircraft on an annual basis before 2029.

Analysts also expect profits and cash flow from 2026 to 2029 to decline, citing lower delivery assumptions and rising costs. The broker has cut its EBIT estimates for 2026-2029 by 12% to 16%, and its free cash flow estimates for 2026 by up to 27%.

The goal to double A350 production to 12 aircraft per month by 2028 has also increased pressure, especially in areas such as forgings and castings, which are limited.

Although Airbus’s free cash flow yield is 5.9%, below the industry average of 4.5%, analysts say this valuation does not fully compensate for downside risks. Rothschild Redburn states that once production risks are addressed, they will revisit the investment case.

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