Investing.com -- Jefferies has upgraded Safran Group's (EPA:SAF) stock rating to "buy" from "hold," flagging a strong growth outlook and opportunities for long-term investors.
This follows Safran’s recent Capital Markets Day, where the company detailed its plans for the future, including earnings growth and investments.
As per analysts at Jefferies, the firm expects Safran’s earnings per share to grow at an impressive compounded annual growth rate of 21% from 2023 to 2028.
They attribute this growth to strong aftermarket trends, particularly in civil aerospace, and the maturation of Safran's LEAP engine program, which is expected to contribute to profitability from 2025 onwards.
The analysts also point to favorable foreign exchange conditions and a planned €5 billion share buyback program, which could further enhance shareholder value.
Jefferies has revised its target price for Safran to €260 per share, reflecting an 18% upside from its current trading levels.
The decision to upgrade comes as Safran's valuation has declined to near-record lows compared to its European aerospace peers, presenting what Jefferies describes as an attractive entry point into a compelling growth story.
Additionally, Safran's free cash flow projections have been adjusted, with expectations that the 2025 outlook will hit the higher end of the company’s guided range.
This is buoyed by expected down payments related to a major Indian Navy Rafale jet order.
Jefferies notes that concerns surrounding cash flow have now largely subsided, and the company is well-positioned to navigate potential headwinds.
Jefferies' also flags potential conservatism in Safran's 2028 guidance, particularly regarding shop visits for its older CFM56 engine fleet and foreign exchange assumptions. These factors suggest further potential upside to the current forecasts.
Despite some near-term challenges, including supply chain issues and inflationary pressures, Jefferies believes Safran's growth trajectory and operational resilience position it as a strong investment choice in the aerospace sector.