Morningstar | Safran's 1Q Revenue Ahead of Our Expectations; FVE Maintained
Wide-moat Safran reported this morning strong first-quarter revenue, beating our expectations for the start of the year. All segments contributed to the group's organic revenue growth at 12.6%. Propulsion, the largest segment in both revenue and operating income terms, delivered double-digit organic growth at 14.8%. We are maintaining our fair value estimate of EUR 110.Strong momentum marked both equipment and services divisions. Demand for services in propulsion at 14.9% organic growth was driven by civil aftermarket, helicopter support activities, and military services. In the aircraft equipment division, services were up 10.9%, mainly as a result of MRO activities for landing gear and support activities for nacelles. Propulsion equipment, at 14.8% organic growth, was mainly driven by Leap volumes, helicopter turbine volumes, and M88 deliveries, partially offset by CFM56 volume ramp-down. Increased nacelles volumes for A320neo and A330neo and higher sales of landing gear and wiring for B787 and A350 were the OE drivers in the aircraft equipment division. First-quarter sales performance positions the firm ahead of management's full-year guidance; however, the uncertainty around 737 MAX grounding adds insecurity for the full-year Leap deliveries (the Leap engine is the sole option for 737 MAX). For the time being, Safran keeps its Leap production rate at 52 per month, given Safran's schedule was already behind the 737 MAX production system announced by Boeing.
Safran designs, develops and manufactures high technology electronics through three businesses: Aerospace, Defense and Security. Aerospace includes Aerospace Propulsion (propulsion systems for commercial aircraft, military transport, training and combat aircraft, rocket engines, civil and military helicopters) and Aircraft Equipment (mechanical, hydromechanical and electromechanical equipment); Defense (optronic, avionic and electronic systems); and Security (biometric technologies for fingerprint, iris and face recognition, identity management products, access management and transaction security, including tomographic systems for detection of dangerous or illicit substances in baggage).
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