Airbus Group takes off with the falling euro.

(CercleFinance.com) - Up almost 20% since the start of the year at around 50 euros, the share of the European aircraft manufacturer Airbus Group has, thanks to FX factors, made the market seemingly forget about its profit warning issued last month.
However, investors need to watch its valuation.

Remember that the share collapsed by over 10% in one session after the investor days held on 10 and 11 December, reaching around 40 euros. At this time, the group warned that the upward trend in its operating profit would stall in 2016. Schematically, Airbus imputes R&D expenditure and particularly the very high development costs of aircraft, once they are paid at the start of programs. As a result, margins automatically improve as aircraft are delivered.

The last major program after those of the A400M and the A380 - the A350XWB, is drawing to its end and has recently entered into its commercial phase with its first delivery. This explains low R&D expenditure in the future. However, in the meantime, a "neo" version of the A330 will be studied, and the market fears a new version of the A380, which will of course mean new expenditure.

Of course, Airbus still benefits from excellent visibility, due to the strength of its orders, which are slightly above those of Boeing last year. Airbus therefore has almost 6,400 aircraft in its order backlog, having delivered 629 in 2014, against less than a total of 5,800 for Boeing.

But what about its valuation? Up almost 20% since the start of the year, the Airbus share is of course benefiting from the collapse of the euro, which most of its production is in, against the dollar (and many other currencies), its invoicing currency. Indeed, the euro has fallen to its lowest level against the dollar since September 2003.

This may explain why on Wall Street, the share of the US giant Boeing has "only" risen by 4%, while in Sao Paulo the Embraer share had risen 9%.

However, watch out: after a 9% rise in 2015, in Airbus' 2016 earnings per share are expected to rise by just 1.9%, compared to about 10% for both Boeing and Embraer. Against this, Airbus Group's 2016 P/E of nearly 15x, exceeds that of both Boeing (14.5x) and Embraer (11.8x).

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