EADS’ stock is ‘dead money’ – Barron’s

Published 10:30 am Monday, April 5, 2010

EADS faces a tough time ahead, analysts recently told Barron’s.

The parent company of Airbus could get a boost in shares if the jet maker can land more new jet orders this year than it did last.

However, EADS and Airbus have some long-standing troubles: cost overruns on new programs and political strife.

Airbus’ revenues are up nearly 40 percent since 2001, Barron’s reports. But its profits have been “checkered.” Airbus’ A380 has been a drag on profits as has the A400 military aircraft. Analysts worry those kind of delays and costs could affect Airbus’ new A350 XWB jet.

At first glance, EADS’ financial picture looks strong. But the company has both high pension costs and a large amount of “launch aid” to repay to the governments of Europe.

The analysts’ concerns lead Barron’s to conclude:

“At best, EADS stock is dead money. If profitability and new orders don’t improve, it could see a rough landing.”