Thales Sales Growth Guidance Revision Leads to Share Fall

Shares of the French aerospace-and-defense company Thales dropped in Friday morning trading following a revision to its sales growth guidance for the year. Recent fluctuations in exchange rates have led to lower projections for the company.

At 0830 GMT, Thales shares were trading 4.5% lower at EUR133.85.

Revised Sales Growth Target

Thales announced on Friday that it now expects organic sales growth of 5% to 7%, narrowing its previous forecast range of 4% to 7%. Despite raising the lower end of the range, Thales is estimating sales of 17.9 billion euros to 18.2 billion euros ($19.92 billion-$20.26 billion) based on July exchange rates. This falls short of the EUR18 billion to EUR18.5 billion it had projected earlier this year.

Foreign-Exchange Swings Impact Guidance

Jefferies analysts commented that foreign-exchange swings had a more negative impact than anticipated, effectively resulting in a 1% cut to sales guidance.

Strong First-Half Performance

The update to sales guidance comes after Thales reported first-half sales and earnings that exceeded analysts’ expectations. The company experienced growth in its aerospace and defense, as well as security businesses.

Thales achieved sales of EUR8.72 billion, increasing by 5.6% on a reported basis and 7.7% organically. The company’s order intake amounted to EUR8.56 billion, down 24% on a reported basis and 23% organically.

Net profit increased by 15% to EUR649 million, while adjusted net profit rose by 13% to EUR819 million. Earnings before interest and taxes (EBIT), which is Thales’s preferred measure of profitability, reached EUR993 million compared to EUR891 million in the first half of the previous year, resulting in an 11.4% margin.

Free operating cash flow for the period was EUR99 million, a decrease from EUR820 million the previous year.

Analysts’ Forecasts

Analysts had predicted sales of EUR8.64 billion, an order intake of EUR8.49 billion, adjusted net profit of EUR764 million, EBIT of EUR980 million with an 11.3% margin, and free operating cash flow of EUR85 million, according to a company-provided consensus.

Future Expectations

Thales still anticipates achieving an EBIT margin between 11.5% and 11.8% for the full year.