Excerpt from our Wall Street Breakfast, a one-page summary of this morning's key market-moving and stock-moving stories:
A380 Charges Trigger Surprise EADS Loss [MarketWatch.com]
Summary: Airbus parent and European defense giant EADS announced a Q3 loss of 195M euros ($249M), a result of it taking an unexpected 1B euro charge over production delays in its flagship A380 superjumbo program. EADS had previously announced (Oct. 19) that it would be taking a 1.1B euro charge before year end, but the move to do so now took investors by surprise -- they expected EADS to post a small Q3 profit. EADS has not had an easy year: yesterday FedEx cancelled an order for 10 A380 freighters, opting to buy from U.S. rival Boeing. Last week, Boeing got an order from TAM SA, Brazil's biggest airline, for four 777s, breaking Airbus's stronghold on Latin America. In June, shares dropped 26% in one day when the company originally announced that a fresh round of delays in A380 deliveries would cost it 2B euros over the next four years. In October, EADS announced the A380 would be delayed by another year, wiping out another 4.8B euros in profit. Previous CEO Noel Forgeard recently resigned after it emerged he profited wildly by cashing in on stock options in advance of the delay announcements. On the brighter side, underlying performance was better than expected: aside from the A380 blunders, Airbus performed well. Sales were up 14%, and EADS confirmed its 2006 sales expectation of 37B euros. EADS shares fell 1% on the news, then recovered, and were up 2.4% in Paris this morning.
Related links: Seeking Alpha commentary: Boeing Inks Cargo Plane Contract With FedEx After Airbus Delays Delivery • William Trent says FedEx is the #1 customer for the A380, and "if they are no longer in the market for the A380, you can stick a fork in it." • Airbus' New Headache: Boeing Wins TAM SA Jet Order • Airbus ' Loss in Market Share is Boeing's Gain • The Jumbo Jet ( Airbus ) is Fast Becoming Irrelevant • Airbus Superjumbo Stalled at the Gates. Earnings conference call transcripts: Boeing Q3 2006
Potentially impacted stocks and ETFs: Boeing Co. (NYSE:BA), TAM SA (NYSE:TAM) • ETFs: iShares Dow Jones US Aerospace & Defense (BATS:ITA), PowerShares Aerospace & Defense (NYSEARCA:PPA)
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