Bernstein upgrades Safran stock to Outperform on strong aftermarket outlook

Bernstein analyst Adrien Rabier upgraded Safran SA to Outperform from Market Perform, raising its price target to EUR370 from EUR320, based on a bottom-up analysis projecting significant upside to the company's guidance, particularly in its aftermarket segment. The upgrade is driven by expectations of sustained aftermarket strength through 2030 due to limited new aircraft supply and global traffic growth, alongside Safran's robust financial health. Bernstein's detailed modeling suggests current medium-term targets are conservative, forecasting 9% higher engine profits by 2028 and 35% higher shop visits than Safran's own projections by 2030, which will significantly boost the company's most profitable services and spare parts businesses.

Analysis

Bernstein has upgraded Safran SA (EPA:SAF) to Outperform from Market Perform, increasing the price target to EUR370 from EUR320, despite the stock's significant 54% year-to-date appreciation. The upgrade is underpinned by a bottom-up analysis indicating that Safran's own guidance, particularly for its high-margin aftermarket segment, is overly conservative. This bullish thesis is supported by strong industry tailwinds, including a limited supply of new aircraft and sustained global traffic growth, which extend the maintenance lifecycle of existing fleets. Safran's fundamental strength is highlighted by a perfect Piotroski Score of 9 and robust gross profit margins of 49%. Bernstein's proprietary model for the CFM56 engine program projects that maintenance shop visits could be 35% higher than Safran's forecast by 2030. This anticipated surge in maintenance activity is expected to drive engine profits 9% above consensus estimates by 2028, directly benefiting the company's most profitable services and spare parts segments.

Key Decisions for Investors

• Given the detailed analysis suggesting Safran's guidance is overly conservative, investors could view the recent 54% year-to-date rally as having further room to run, supported by potential future earnings beats.
• Investors should closely monitor KPIs related to the aftermarket business, such as services revenue and shop visit volumes in subsequent earnings reports, as these are the primary drivers for the forecasted profit outperformance.
• Consider Safran as a key vehicle to gain exposure to the sustained aerospace aftermarket cycle, which is being driven by structural constraints on new aircraft production and persistent growth in global air traffic.