JP Morgan Business Jet Monthly: January 2013
The JP Morgan report contains their industry delivery projections plus data on market share and the used market. The industry is an important driver for many stocks they cover, including BBD/B, ERJ, GD, COL, and TXT.
BBD/B generated strong order volume in Q4. Bombardier reported 124 business jet orders, boosted by 56 Globals from Vistajet, but book-to-bill was 1.13x even after netting these out. JP Morgan believe Learjet orders perked up and will be eager to see whether Q4 shored up the near-tem outlook for Challenger, for which we expect deliveries to decline in 2013.
Bombardier will forecast 2013 deliveries when it announces Q4 earnings in late February.
Others will report soon. TXT and GD both report Q4 on January 23. Initial indications from Ascend are that Cessna delivered only ~40 jets, well below expectations from a few months ago.
Gulfstream deliveries seem more in line with our estimate of 33 and we will look for whether backlog stabilised after declining at a lower rate each of the prior two quarters.
Embraer releases 2013 guidance on February 5, and JP Morgan expects little change to management’s cautious demand outlook, with the caveat that EIS of the Legacy 500/450 will drive growth starting in 2014.
Among suppliers, COL reports January 18 and HON January 25.
Finally, we believe there could be news this month on the future of Beechcraft and whether it moves toward an independent emergence from bankruptcy or is acquired by another aerospace company.
Used inventories fell 20 bps in December. Used inventory of in-production models was 10.6%. Inventories have moved in a tight range this year and finished 2012 down only 20 bps from 2011. Heavy jets stabilised in December after a weak November, falling 10 bps, and Medium jet performance was strongest with a 70 bp decline, while Light jets were up 10 bps. “Toddler and pre-K” fleet inventories (aircraft 0-5 years old) increased 20 bps to an estimated 7.9% in Nov, a 100 bp y/y increase and a negative signal for new jet demand.
Avg asking price flattish m/m in November. Prices were down 9% y/y, however, and fell sequentially in 8 of 12 months last year. Heavy jet prices were up 0.5% sequentially, while Medium jet prices fell 2.0% and Light jet prices were down 0.2%. Used pricing is a key indicator of new jet demand, and we believe it will be a more coincident indicator of a recovery than inventory.
