Boeing vs. Airbus: Which Stock is a Better Buy?

Headquartered in Leiden, the Netherlands, Airbus SE (EADSY) designs, manufactures, and distributes aerospace products and solutions internationally. The company operates through three segments: Airbus; Airbus Helicopters; and Airbus Defense and Space. In comparison, The Boeing Company (BA), in Chicago, designs, develops, manufactures, sells, services, and supports commercial jetliners, military aircraft, satellites, and missile defense worldwide. The company operates through four segments: Commercial Airplanes; Defense, Space & Security; Global Services; and Boeing Capital.

Even though the defense industry does not usually possess high growth prospects, shares of defense companies provide stability thanks to their long-term contracts with governments. Senate appropriators recently unveiled plans for approximately $24 billion in extra military spending—above the president’s $715 billion budget request—for the Fed’s fiscal year 2022. Furthermore, the government’s planned procurement of advanced military equipment to replace aging equipment currently in service, along with technological advances, are expected to accelerate the growth of the defense sector. So, both EADSY and BA should benefit.

EADSY has gained 16.6% in price over the past nine months, while BA has returned 8%. Also, EADSY’s 20.4% gains year-to-date are significantly higher than BA’s 4.9% returns. Moreover, EADSY is the clear winner with 14.4% gains versus BA’s negative returns in terms of the past six months’ performance.

But which of these two stocks is a better buy now? Let’s find out.

Latest Developments

On November 3, 2021, EADSY launched Airbus Scale, an innovation unit that brings together corporate innovation, startup engagement, and company building activities. The unit should  support Airbus’ recovery and future growth, contributing to the development of future programs and businesses as part of the company’s zero-emissions ambition.

BA, meanwhile, will showcase its market-leading portfolio of commercial, defense, and services products at the 2021 Dubai Airshow this month, including the international debut of its newest fuel-efficient widebody jet, the 777X, along with the company's growing autonomous capabilities, such as the Boeing Airpower Teaming System.

Recent Financial Results

EADSY’s revenues increased 17% year-over-year to €35.20 billion ($40.71 billion) for the nine months ended September 30, 2021. The company’s net income was  €2.64 billion ($3.04 billion) compared to a €2.69 billion ($3.12 billion) loss in the prior-year quarter. Also, its EPS was €3.36 compared to a  €3.43 loss in the year-ago period.

BA’s revenues increased 10.8% year-over-year to $47.49 billion for the nine months ended September 30, 2021. The company’s net loss declined 96.4% year-over-year to $126 million. Also, its loss per share was  $0.10, representing a 98.4% year-over-year decrease.

Expected Financial Performance

Analysts expect EADSY’s revenue to increase 11.9% in the next quarter and 14.4% next year. In comparison, BA’s revenue is expected to increase 37.5% in the next quarter and 34.5% next year.

Profitability

EADSY’s trailing-12-month revenue is 1.01 times what BA generates. EADSY is also more profitable, with EBITDA  and net income margins of 14.03% and 7.63%, respectively, compared to BA’s negative values.

Furthermore, EADSY’s ROA and ROTC of 3.24% and 16.33%, respectively, compare with BA’s negative values.

Valuation

In terms of forward EV/S, BA is currently trading at 2.66x, which is 58.3% higher than EADSY’s 1.68x. And BA’s forward 40.39 EV/EBITDA ratio is 225.5% higher than EADSY’s 12.41.

So, EADSY is relatively affordable here.

POWR Ratings

EADSY has an overall C rating, which equates to Neutral in our proprietary POWR Ratings system. In contrast, BA has an overall rating of D, which translates to a Sell. The POWR Ratings are calculated considering 118 distinct factors, with each factor weighted to an optimal degree.

EADSY has a B grade for Value, which is consistent with its 1.68x forward EV/S, which is 18.9% lower than the 2.07x industry average. However, BA has a C grade for Value, which is in sync with its 2.66x forward EV/S, which is  28.6% higher than the 2.07x industry average.

Furthermore, EADSY has a C grade for Quality. This is justified given EADSY's 3.22% trailing-12-month CAPEX/Sales, which is 29.4% higher than the 2.49% industry average. In contrast,  BA has a Quality grade of D, which is in sync with its 1.63% trailing-12-month CAPEX/Sales, which is 34.5% lower than the 2.49% industry average.

Of the 71 stocks in the Air/Defense Services industry, EADSY is ranked #23. In contrast, BA is ranked #56.

Beyond what I have stated above, we have also rated the stocks for Growth, Momentum, Stability, and Sentiment. Click here to view all the EADSY ratings. Also, get all the BA ratings here.

The Winner

Increased government spending should drive the Aerospace & Defense industry’s growth. However, neither of the two stocks appear suitable investments now. While EADSY is better positioned than BA in terms of valuation and profitability, it could still be wise to wait for a better entry point in EADSY.

Our research shows that odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the other top-rated stocks in the Air/Defense Services industry here.

EADSY shares were trading at $33.36 per share on Monday afternoon, up $0.46 (+1.40%). Year-to-date, EADSY has gained 22.11%, versus a 26.80% rise in the benchmark S&P 500 index during the same period.

Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles.

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