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Analysis before buying or selling Safran shares

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The Safran share is one of the stocks that you can trade online through trading platforms. But before you invest in this stock, we recommend that you take a few moments to improve your knowledge of this French company. In this article, we will reveal all the information you can use to conduct your analysis of its price with a presentation of this company and its various activities but also a presentation of its competitors and its most recent partners. We will also reveal the strengths and weaknesses of this company as well as the opportunities and threats for its future.

Latest news

Safran's revenue and market capitalization

17/01/2022 - 13h19

In 2020, the Covid-19 health crisis hit several business sectors hard, particularly the aerospace industry. This had an impact on the financial results of the Safran group.

Elements to consider before selling or buying Safran shares

Analysis N°1

To anticipate the market's reaction to Safran's share price, you can look at the company's growth strategy, which includes possible acquisitions and the establishment of targeted partnerships.

Analysis N°2

The signing of certain agreements is also likely to considerably increase sales and therefore the profitability of Safran.

Analysis N°3

We will also be following very closely the evolution of the States in the field of defence and this concerns in particular certain markets such as China or India but also the European market.

Analysis N°4

The group's competition can also represent a serious threat to the rise in its share price and you should therefore follow it with the utmost attention, with the publications and results of all the major direct adversaries of Safran.

Analysis N°5

Of course, we will also keep an eye on Safran's communications regarding its strategic plans with quantified objectives, which we can easily compare with the company's actual results with the publication of its annual accounts or quarterly results.

Analysis N°6

Lastly, any major contract signed will provide medium and long-term visibility on this value.

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General presentation of Safran

We propose to start this article on the Safran group and its stock market share with a detailed presentation of this company and especially some information concerning its main activities and the distribution of its turnover. This will give you a better understanding of this company and its stock market performance.

The Safran group is a French group with an international outlook, specializing in high technology. It is also one of the leading equipment manufacturers in the aeronautics, space and defense segments. It designs, produces and sells high-tech mechanical and electronic equipment and systems.

To better understand the Safran group's activities, it is possible to divide them into several distinct categories according to the share of sales they represent, as follows

  • First, the design, manufacture and sale of aircraft and space propulsion systems account for more than 25.6% of Safran group sales. These include helicopter engines, for which Safran is the world leader, civil and military aircraft, space engines for launchers and missiles, turbojet engines for target vehicles and other such products.
  • Next comes the production of aeronautical equipment, which accounts for 25.6% of the company's turnover, including aircraft engine nacelles, landing gear, braking systems and electrical wiring.
  • Production of aircraft interiors, particularly cabin and seat interiors, accounts for 9.6% of Safran's sales.
  • Next are the aircraft systems and equipment activities, which account for 8.5% of revenues, including escape slides, emergency shutdown systems, protective parachutes and oxygen systems, electrical power management systems, control systems, water and waste management systems and connectivity systems.
  • The remaining 6.6% of Safran's sales came from defense and security systems, including helicopter flight controls, fingerprint-based biometric identification systems, for which Safran is the world leader, inertial and optronic systems, and tactical UAV systems.

It is also interesting to know the geographical breakdown of the group's sales, since Safran generates only 15.7% of its sales in France. The rest of Europe generates 23.9% of sales, the Americas 36.7%, Asia Pacific 16.5% and Africa and the Middle East 7.2%.

Analysis before buying or selling Safran shares
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The major competitors of Safran

One of the main things you need to consider when doing a Safran stock price analysis is the competition in this industry. Specifically, we suggest you find out here which companies compete directly with Safran in its various business categories.

Equipment sector

Safran's direct competitors in the equipment sector include UTC Aerospace System in the United States, the British company General Electric Aviation Systems and the American company Crane Aerospace & Electronics. In the wheels and brakes segment, Safran's competitors are UTC Aerospace System, Honeywell and the British group Meggitt. In the nacelle segment, Safran's main competitors are UTC Aerospace System and Spirit AeroSystems. Finally, in the defence and avionics segment, Safran has only one serious competitor, namely the Thales group.


The major partners of Safran

We now propose to take a closer look at the partnerships and alliances of the Safran group. Indeed, these partnerships are often associated with interesting movements of this stock on the charts and it is therefore important to follow these announcements with interest. Here are three concrete examples of the type of alliances that Safran has set up in recent years.

General Electric

For many years now, the Safran group has been a partner of the General Electric group through its subsidiary Snecma and through a 50/50 joint venture called CFM International. This partnership was renewed in 2008 and will continue until 2040, with an extension of the collaboration that will help position this joint venture in the market in a sustainable way, notably through the development of a new generation of engines. The two companies have jointly developed the LEAP-X engine, which has the advantage of 16% lower fuel consumption than the previous generation of engines powering the Airbus 320 and Boeing 737. As part of the new agreement, service offerings have been integrated for these engines. Since the late 1970s and the establishment of this agreement between the two giants, the course of commercial aviation has been significantly changed as CFM is currently the most popular engine supplier to the commercial aviation sector with a product line that is considered a benchmark throughout the sector in terms of efficiency, reliability and economics.

MTU Aero Engines

Later in 2016, Safran will partner with MTU Aero Engines to develop, produce and service the new engine for the upcoming SCAF fighter aircraft. This aircraft is scheduled to enter service in 2040 and will succeed the current generation of Eurofighter and Rafale fighter aircraft. Together, the two partners will ensure the management and efficiency of the program and offer the armed forces their proven experience in the military field. Under the partnership, Safran will have overall responsibility for engine design and integration, while MTU Aero Engines will be responsible for services. MTU Aero Engines will be responsible for the low- and high-pressure compressors, the low-pressure turbine and the afterburner. The joint company created by the two entities, Aerospace Embedded Solutions, will be in charge of developing the engine control computer and software under Safran's control.

Electrical & Power

Finally, more recently, in 2018, the Safran Electrical & Power subsidiary set up a technological and commercial cooperation agreement with a start-up, CAILabs, with the aim of transposing CAILabs' innovative technology, which is implemented in the field of terrestrial telecoms networks, to the aeronautical industry. The technology, called Multi-Plane Light Conversation, consists in mixing different optical flows on the same optical fiber, which will increase tenfold the data transport capacities on board aircraft. The aim of this association is to meet the growing need for on-board data exchanges, whether for passenger connectivity or for technical functions on the aircraft, which consume more and more bandwidth. These jointly developed optical components should ultimately facilitate the development of the on-board data interconnection system and reduce the costs associated with aircraft configuration changes with less wiring. The company supplies Boeing and Airbus for all civil programs and the A400M military program and many other military aircraft.

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Positive factors for Safran shares
The factors in favour of a rise in the Safran share price:

First of all, we can of course recall here that the Safran group benefits from a very strong market presence and an advantageous positioning due to the fact that it was created by the merger of the Snecma group and the Sagem group in 2005. As a result, Safran has become the world leader in civil aircraft engines, helicopter turbines and flight controls, power transmission, aircraft engine nacelles and is also the second largest supplier of space engines. Safran is also currently the world's fourth largest supplier of military aircraft engines.

One of the many advantages of this group is that its activities are divided into several segments and divisions. These include the aerospace propulsion segment, the aircraft equipment segment, the defense segment and the security segment. Separating these activities into several categories offers Safran greater protection against the risk associated with a single business segment by multiplying its sources of revenue.

Another positive aspect of this stock is that the Safran group communicates clearly and transparently about its growth strategies. The frequent press releases issued by the group's management make it easier for traders to analyse the economic and financial outlook.

Of course, as you have seen from the above, the very strong and well thought-out partnerships that the group has set up in the past are also a major asset for the future of this company.

This order book is also a rather positive argument in the analysis of the Safran group's strengths. It has been beating records for several years, and offers excellent visibility on future results, especially in the civil engine aftermarket.

Safran also benefits from a very interesting source of income through its numerous patents. Although these patents have required a great deal of investment in research and development in the past, they are now bearing fruit, providing additional benefits for the group.

Finally, Safran shareholders are also reassured by the fact that Safran has a payout ratio of around 40%.

Negative factors for Safran shares
The factors in favour of a drop in the Safran share price:

First of all, the Safran group has been experiencing significant pressure on its working capital for several years. These difficulties are the result of several successive delays in payment by government agencies, which have weighed on the company's results.

In addition, the Group had to make major investments to develop the Silvercrest engine for Dassault Aviation's Falcon aircraft, as well as other major investments to learn about the Leap engine, which has just been launched on the market. These costs are still weighing on the group's profitability.

Other events may have hurt the group's success and growth recently such as the delay in the actual commissioning of the joint venture that the Safran group created in 2014 with the Airbus group, which greatly worried the markets and still worries them today.

The strong competition that the Safran group faces, particularly in certain very specific segments, may also be detrimental to the group's growth, given that the technological developments of these competitors have been much in the news for several years now.

Lastly, investors are concerned about Safran's numerous investments in the context of acquisitions of other companies, which are further weighing on its earnings growth potential.

The information supplied here is only for indicative purposes and should not be used without the completion of a comprehensive and complete fundamental analysis of this asset notably taking into account exterior data, future publications and announcements and all fundamental events and news that could influence the strengths and weaknesses or make them more or less significant. This information does not in any way constitute recommendations relating to the completion of transactions or a solicitation to buy or sell an asset.

Frequently Asked Questions

Where are Safran group shares listed?

The Safran group's shares are currently listed on compartment A of the Euronext Paris market. In total, the company's capital is made up of 435,790,557 shares with a par value of 0.20 euros per share. Safran's ISIN code on the market is FR0000073272. The Safran group is also included in the CAC 40 national benchmark stock market index.

What are the different subsidiaries of the Safran group?

The Safran group currently operates through various subsidiaries, including Safran Aero Booster, Safran Aircraft Engines, Safran Ceramics, Safran Electrical & Power, Safran Electronic & Defense, Safran Helicopter Engines, Safran Landing Nacelles, Safran Landing Systems, Safran Nacelles, Safran Transmission Systems, Safran Aerosystems, Safran Cabin, Safran Seats, Safran Passenger Solutions and Safran Tech. The group also holds a 50% stake in ArianeGroup.

What was Safran's latest revenue?

Today, we have access to the financial results of the Safran group for the fiscal year 2019. Thus and according to its balance sheet, the group achieved a turnover of 24,640,000,000 euros which is an increase of 17.1% and its net income was 2,447,000,000. The group regularly publishes its financial results on its website in the section dedicated to investors and you will find more details and forecasts for the coming years.

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