Airbus Shares Plunge 10% as Jet Delivery Forecast and Space Segment Challenges Weigh Heavily

Airbus (EPA: AIR) witnessed a notable 10% plunge in its stock value during early European trades on Tuesday. This downturn follows the company's announcement of a downward revision in its jet delivery forecast and a substantial provision charge of nearly one billion euros in its space segment for the first half of its fiscal year.

In a statement released Monday, the aerospace titan adjusted its 2024 delivery expectations to approximately 770 commercial aircraft, reduced from an anticipated 800. This new target suggests a deceleration in growth to 5%, down from the previous year's 9%. Additionally, the company has postponed its goal to reach a delivery rate of 75 monthly units for its renowned A320neo model until 2027, originally slated for 2026. Presently, Airbus rolls out around 50 jets each month, as per Reuters.

The firm attributed these revised projections to "persistent specific supply chain issues primarily involving engines, aerostructures, and cabin equipment." The industry, including Airbus, continues to grapple with supply chain disruptions stemming from the COVID-19 pandemic, which has adversely affected the financial health of numerous part suppliers.

Analysts at RBC Capital Markets expressed that although the supply chain issues were anticipated, they remain frustrating for investors. In light of these challenges, Airbus revised its full-year underlying operating income forecast to 5.5 billion euros, down from an earlier estimate of 6.5 billion to 7.0 billion euros. Furthermore, the projection for free cash flow has been downgraded to 3.5 billion euros from a previous outlook of 4.0 billion euros.

Additional concerns stem from Airbus's Space Systems division, where an internal review uncovered "commercial and technical challenges," leading to a 900 million euro provision charge. While acknowledging the setback, Stifel analysts termed this charge "disappointing," though they commended the company's management for countering the perception of the division as a financial drain.