There are very few things that goose the needle on a stock like cost cutting. It proves that management has the fortitude to do the right thing, as far as shareholders are concerned, even if it often comes with a human cost. Aircraft maker Airbus (OTHEROTC:EADSY) hasn’t been having the greatest of years production-wise, and so it’s planning some cuts itself. Shares were up modestly in Friday morning’s trading.
In something of an unexpected maneuver, Airbus’ planned cost cuts won’t include wholesale firings. However, it does have a plan to freeze the current headcount, which means there won’t be much in the way of new hiring. The project is currently known as “LEAD!” and it will look to not only improve current productivity but also help lower the cost per plane produced.
There may be some jobs lost, according to Airbus CEO Christian Scherer, but that’s not going to be the go-to method to cut costs. Secondary projects and office jobs are said to be key targets of the plan, along with issues of absenteeism at work. Apparently, getting factory workers to show up regularly has proven a problem for Airbus. Airbus is also eager to capture more of the current airline demand, especially with Boeing (NYSE:BA) currently hobbled by government mandate.
Engineering Tomorrow
However, Airbus isn’t just out to improve its market power; it’s also working to improve its product line. Airbus is working on a way to beat CFM International’s RISE program by bringing out a new line of open-rotor engine concepts. The RISE engine is already attracting quite a bit of attention, and Airbus hopes to head some of those gains off with its own system.
Open-rotor designs, like CFM International’s RISE program, come with several valuable benefits. Among these are reduced fuel burn rates and lower emissions, which are particularly attractive features in an era of soaring fuel prices and environmental concerns.
Is Airbus a Buy, Sell, or Hold?
Turning to Wall Street, analysts have a Hold consensus rating on EADSY stock based on one Buy and one Sell assigned in the past three months, as indicated by the graphic below. After a 2.23% loss in its share price over the past year, the average EADSY price target of $41.20 per share implies 13.36% upside potential.
