Jefferies has upgraded Safran Group's stock rating to "buy" from "hold," citing robust growth prospects and appealing opportunities for long-term investors. The decision follows Safran’s Capital Markets Day, where the company outlined ambitious plans for earnings growth and strategic investments.
Analysts project Safran’s earnings per share to achieve a 21% compounded annual growth rate from 2023 to 2028. Key drivers include strong aftermarket trends in civil aerospace and the LEAP engine program's profitability, expected from 2025. Additional tailwinds include favorable foreign exchange rates and a €5 billion share buyback plan aimed at enhancing shareholder returns.
Jefferies raised its price target for Safran to €260, reflecting an 18% upside from current levels. Analysts highlight the stock's undervaluation compared to European aerospace peers, presenting an attractive entry point into this growth story.
Free cash flow projections have also been revised upward, with 2025 expected to hit the high end of Safran’s guidance. This optimism stems from anticipated down payments tied to a significant Indian Navy Rafale jet order.
Jefferies notes concerns over cash flow have eased, and Safran is well-prepared to manage supply chain and inflationary pressures. Additionally, conservative assumptions in Safran’s 2028 guidance, such as shop visits for the CFM56 engine fleet, suggest potential upside beyond current forecasts.
Despite minor challenges, Jefferies believes Safran’s operational resilience and strategic initiatives solidify its position as a compelling investment in the aerospace sector.