Airbus is undervalued and looks more cash-rich than Boeing, Barclays analysts say

Key Points
  • Analysts at Barclays have put a price target of 155 euros on Airbus.
  • The firm's current share price sits just under 120 euros.
  • Barclays believes Airbus is currently valued at a 45% discount to Boeing.

The immediate future for Airbus looks "brighter than ever" thanks to a mature portfolio offering reliable cash flow over the next five years, according to equity analysts at Barclays.

"Central to our investment thesis on Airbus is our view that the scale and predictability of its FCF (free cash flow) is superior to Boeing, yet Airbus trades at a much larger than normal discount to Boeing," Barclays aerospace analysts said in a new research note Monday.

Under new coverage of Airbus shares, led by Paris-based analyst Milene Kerner, the bank put a price target of 155 euros ($171) per share with an "overweight" rating. On Tuesday morning, Airbus stock was priced on the French CAC-40 at just over 119 euros per share.

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By comparison, Boeing's current share price is $372 and has risen nearly 16% year-to-date.

The researchers believe Airbus's range of jet planes "should outgrow" Boeing's by 2024, aided by the U.S. planemaker's frustration over its grounded 737 Max plane as well as challenges getting its new 777X into commercial service.

Barclays believe Airbus's "more mature" product range would guarantee smoother income and free cash flow could triple from 3 billion euros in 2018 to around 9 billion euros in 2024.

"The cash flow profile at Airbus is now becoming more predictable and robust compared with that of Boeing," the bank said.

'Striking' discount

Barclays calculated that when Airbus and Boeing are stripped back to their commercial airplane divisions, current share prices imply Airbus is valued at a "striking" 45% discount to that of Boeing's.

It says this discount is undeserved and doesn't properly factor in Airbus's share of the single-aisle jet market.

"We estimate the present value of the total narrowbody industry at $238 billion, which implies that a 50/50 split is worth 140 euros per share to Airbus — 20% above Airbus' current share price."

Barclays said Airbus's popular A321 jets alone should contribute 3.4 billion euros of free cash flow to the company over the next five years.

In its note, Barclays said: "Investors should be aware that it does seek to do business with companies covered in its research and that investors should be aware that the firm may have a conflict of interest that could affect objectivity."