The outbreak of the pandemic restricted travel and caused the U.S. airline industry to lose over $35 billion in 2020 alone.
Of course, this hit caused both airline and airplane manufacturing stocks to fall significantly over the last two years.
Two aircraft manufacturing giants that were hit especially hard were Boeing and Airbus. Fast forward to present day, which company has bounced back best and which of the two, between Boeing vs Airbus stock, is the better investment going forward?
A Brief History of Boeing
The Boeing Company is an American multinational corporation that designs, manufactures, and sells airplanes, rotorcraft, rockets, satellites, telecommunications equipment, and missiles. The company was founded in 1916 and is headquartered in Seattle, Washington.
The company went public in 1962, trading on the New York Stock Exchange under the stock ticker BA. The stock began trading for an IPO price of around $0.82 per share. Between 1966 and 1997, the company completed eight stock splits.
The stock hit an all-time high in January 2019, trading at just over $380 per share. However, it experienced a significant downtrend around March 2020 and the onset of the pandemic.
The stock’s 52-week low is $167.58, and its 52-week high is $258.40.
Airbus SE is a European multinational aerospace corporation. The company was founded in France in 1970 and is now headquartered in the Netherlands.
This European aerospace company manufacturers and sells civil and military aerospace products worldwide and manufactures aircraft in Europe and various countries outside of Europe.
Airbus SE trades under the stock ticker EADSY. Prior to the outbreak of the pandemic, EADSY was trading for just over $36 per share. However, around March 2020, the stock fell significantly, trading for just $16 per share.
Recently, EADSY had a market cap of $89.8 billion. The stock’s 52-week low is $24.64, and its 52-week high is $35.00.
Aircraft Manufacturers Battle: Airbus vs Boeing Stock
In the Aircraft Manufacturing space, Boeing and Airbus are two of the biggest players. While they both have long and successful histories within the space, the Boeing company has seemingly been hit harder. Boeing has burned tens of billions of dollars over the past two years. This has led to a severe weakening of the company’s balance sheet.
In comparison, the pandemic has seemed to only be a minor setback for Airbus, with the company posting a strong earnings report at the close of 2021.
At the close of 2021, Airbus CEO, Guillaume Fuary, relayed to shareholders, “2021 was a year of transition, where our attention shifted from navigating the pandemic towards recovery and growth. Thanks to the resilience and efforts of our teams, customers, and suppliers, we delivered remarkable full-year results.”
Fuary went on to say, “Record net income and our efforts to strengthen the net cash position underpin our proposal to reintroduce dividend payments going forward. At the same time, we continue to invest in our strategic priorities and in the transformation of our company.”
From these statements and figures, it’s clear that Airbus is on the other side of any setbacks. Unfortunately, Boeing can’t say the same.
During the Boeing Q4 2021 Earnings Call, Boeing President and CEO Dave Calhoun relayed to shareholders that 2021 was definitely a rebuilding year for the company, acknowledging that Boeing is not back on track quite yet.
Calhoun relayed the message, “With respect to the environment, there’s no doubt Omicron has paused the industry recovery. But it has not changed the outlook for the industry recovery, such that while it might be delayed a few more months, the bookings, and the customer discussions with respect to fleet plans, medium and long term, are still quite robust. And we are quite confident in that outlook. 2021 I would characterize for Boeing as a rebuilding year.”
While Boeing Executives remain optimistic about the future of their company, returning to pre-pandemic levels of success will be far from a cakewalk.
In addition to a negative balance sheet, Boeing has received negative press as of late. In March 2022, a Boeing 737 crashed in China with 132 people on board. Accidents like these raise questions about the safety regulations of Boeing aircraft and cause uncertainty among investors, shareholders, and the general public.
Which Aircraft Manufacturer Should You Invest In?
Looking at the recent balance sheets of these two aircraft manufacturers, it’s clear that Airbus is the more stable company as of right now.
On the other hand, Boeing ended 2021 with over $40 billion of net debt. Based on these numbers, Boeing won’t be able to make meaningful progress on debt reduction until 2023 or beyond. In addition, Boeing will need a few years before being able to fix its balance sheet and provide its shareholders with any meaningful returns.
Overall, all signs point to Airbus stock being the clear winner right now when comparing these two aircraft manufacturers. However, both Boeing stock and Airbus stock are at discounted prices right now.
Therefore, for long-term investors, adding either of these stocks may prove to be a wise decision if both of these aircraft manufacturing titans can make full recoveries over the next several years.
Boeing Vs Airbus Valuation
Comparing valuation metrics for the two manufacturers reveals an interesting story. The fair market value for Boeing share price is $181.76 based on a discounted cash flow forecast analysis (DCF). In contrast, the intrinsic value for Airbus sits at $37.69.
When we examine Boeing’s current share price relative to its upside potential, the opportunity is minimal, just 3% for the bulls. However, Airbus paints a much more attractive picture for would-be investors. The share price of Airbus can theoretically rise 36% from current levels before reaching fair value according to a DCF analysis.
Not only is the balance sheet of Airbus more attractive but the valuation metrics suggests Airbus is the better bet too.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.