It was about as close to a "photo finish" as these things get in the world of international megabusiness.
In the final days of 2014, Airbus (NASDAQOTH:EADSY) gunned its engines, raced ahead, and overtook archrival Boeing -- winning the race to take in the most plane orders of 2014. There were 1,796 "gross" plane orders and 1,456 orders net-of-cancellations. That's what Airbus ended the year with, versus Boeing's tally of 1,432 net new orders at year-end. But even with that victory in the bag, the question still remained for investors: How much profit is Airbus making on all these planes it's selling?
Turns out, they made quite a lot of profit indeed.
The year that was, for Airbus
Last week, Airbus released its financial results for fiscal year 2014. The results were fairly startling:
- Revenues grew 5% in comparison to 2013 results, to $67.2 billion. That was similar to Boeing's result.
- Earnings, however, rocketed 61% to $3.29 per diluted share, eclipsing even Boeing's 24% earnings improvement for the year.
- Additionally, in contrast to 2013, when Airbus reported negative free cash flow from its business, the company claims that it generated positive cash profits of $2.2 billion in fiscal year 2014.
Granted, accountants may differ on that last claim. According to S&P Capital IQ, actual free cash flow at Airbus, as defined by cash from operations minus capital expenditures, amounted to only $15.5 million. Either way, though, the European plane maker clearly reversed its cash-burning ways of 2013, and generated (at least) a small cash profit for 2014.
And it's this success that Airbus aims to build on as it progresses through 2015 and beyond. According to management, Airbus's backlog of planes remaining to be built now stands at 6,386 aircraft -- enough work to keep Airbus's engineers and mechanics busy for the next 10 years, building planes for its customers, even if Airbus doesn't book a single new order between now and then. (Hint: Airbus actually netted 28 new orders last month alone.) In dollar terms, the company says its total "order book" is now worth $884.8 billion at list prices -- up 28% year over year, despite unit orders growing by "only" 15%.
What's more, if anything, Airbus' backlog number is getting bigger, not smaller -- promising even greater revenue growth in the future than the 5% increase seen in its recent past. Management notes that 2014 saw the company achieve a book-to-bill ratio of more than two -- meaning the company is taking in new orders at twice the pace at which it can fulfill its old orders.
The upshot for investors
It's hard to overemphasize just how transformative Airbus' results now look. Once cash-burning, the company's now a bona fide cash generator. Once badly lagging Boeing on profitability, Airbus is finally closing the gap.
Granted, Airbus still has obstacles to overcome. The backlog of work it faces to get all its customers' orders filled is pretty staggering, and last year, its commercial aircraft deliveries inched up only 0.5% -- far underperforming the pace of sales gains. Whether Airbus can capitalize on its sales success, therefore, and ultimately reward shareholders as they might like, is hard to say.
It's even harder to deny, though, that Airbus has just turned the corner on a very good year.
Rich Smith does not own shares of, nor is he short, any company named above. You can find him on CAPS, publicly pontificating under the handle TMFDitty, where he's currently ranked No. 303 out of more than 75,000 rated members.
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