Goldman Sachs initiates Safran stock with Buy rating on engine business

Goldman Sachs initiated coverage on Safran SA (EPA:SAF) with a Buy rating and a EUR340.00 price target, citing anticipated sustained strength in its Propulsion business driven by increased legacy engine servicing and growing profitability in the LEAP engine aftermarket. The firm projects a low-double-digit EBIT CAGR for Safran's Propulsion division through FY24-28E, exceeding management guidance, and expects the Interiors business to return to normalized margins, implying approximately 20% upside potential.

Analysis

Goldman Sachs has initiated coverage on Safran SA (EPA:SAF) with a Buy rating and a EUR340.00 price target, implying approximately 20% upside potential from current levels. The foundation of this positive outlook is the anticipated sustained strength within Safran's Propulsion business. Goldman's proprietary analysis of flight cycle data for legacy CFM56 engines suggests shop visits will remain elevated at or above fiscal year 2025 levels through fiscal 2027, underpinning robust aftermarket revenue. This is complemented by growing profitability from the newer LEAP engine aftermarket. Critically, the investment bank's forecast diverges optimistically from the company's own projections; Goldman projects a low-double-digit EBIT CAGR for the Propulsion division through FY24-28E, exceeding management's guidance of mid-to-high-single-digit growth, attributing this to sustained pricing power and an expanding LEAP workscope. An additional growth tailwind is expected from the Interiors business, which is forecast to return to normalized margins over the medium term.

Key Decisions for Investors

• Investors should consider the bullish thesis from Goldman Sachs, which points to a 20% upside potential and growth exceeding management's own guidance, as a basis for evaluating a long position in Safran SA.
• It is critical to monitor Safran's upcoming earnings for key performance indicators within the Propulsion division, particularly the volume of CFM56 shop visits and the margin progression of the LEAP engine aftermarket, to validate the analyst's forecast.
• Traders should watch for any upward revisions to Safran's corporate guidance, as this would serve as a strong confirmation of the bullish outlook on pricing power and workscope expansion, likely acting as a significant positive catalyst for the stock.