- Safran’s shares have more than doubled since 2023, fueled by a booming single‑aisle market and the LEAP engine’s near‑duopoly on the 737 MAX and A320 neo, yet the stock now trades at roughly 38× earnings, requiring careful valuation discipline.
- Management guides mid‑teens earnings growth through 2026 on 15–20 % higher LEAP deliveries and a rapidly expanding aftermarket, where spare‑parts revenue jumped 25 % and service fees 18 % in Q1 while free‑cash‑flow conversion stays above 80 %.
- Defense and space sales (39 % of revenue) provide a counter‑cyclical buffer and fund the RISE open‑fan demonstrator, ensuring Safran remains positioned for the next generation of single‑aisle propulsion.
- The Interiors division, once a drag, has turned profitable; a credible path to a 10 % margin by 2028 would further lift group leverage without heavy capex.
- At a 3.9 % forward FCF yield, upside hinges on execution: sustained engine ramp‑up, tariff avoidance, and stable supply chains could lift annual FCF toward €6 billion by 2028, supporting a Buy rating with high‑single‑digit total‑return potential.
A Hot Runway Meets a Price Ceiling
The Paris‑listed shares of Safran SA have more than doubled since early 2023 and now hover near €285, a record that would have seemed bold even to bulls two summers ago. Each new high rests on the same simple math: the single‑aisle jet market is booming, engines are in short supply, and Safran owns half of the only family of powerplants that airlines truly want right now. The LEAP turbofan runs the 737 MAX and powers about half of all A320 neo deliveries. That grip on narrow‑body lift is why the stock has cruised to fresh peaks even while big indexes tread water. A fresh stock analysis must, however, weigh exuberance against price.
My view remains constructive. The firm still looks set to grow earnings at mid‑teens through 2026 on rising engine volume and an expanding aftermarket. Free cash conversion remains higher than 80 %, and management pairs that conversion with a cautious balance sheet and a clear capital‑return road map. None of that comes cheap at 38x trailing earnings, yet the price tag reflects a franchise that generates cash in both good skies and bad. The upside today is less dramatic than last year, but the path to solid compound gains is still open.
Jet Engines Are The Core
Civil aviation recovers in waves. Wide‑body traffic was last to rebound after the pandemic, while short‑haul demand roared back first and never let up. Safran finds itself in the sweet spot of that return because narrow‑body jets dominate global order books. CFM International, the 50‑50 venture with GE, ended 2024 with a LEAP backlog that stretches well into the 2030s. Airbus plans to lift A320 neo output to 75 a month, Boeing targets 50+ 737 MAX jets a month once supply difficulties fade, and every one of those airframes needs two LEAPs. Safran delivered 1407 LEAP engines last year and guides for 15–20 % more in 2025, even after a slow Q1 start that saw only 319 units ship due to casting shortages.
The backlog offers other perks. Engine pricing holds up because airlines value on‑time delivery over haggling for discounts, and Safran structures LEAP contracts so that part of the economic return arrives later via service fees. The company books initial sales at low double‑digit margins but captures much richer work during the life of the engine. In short, the bigger the fleet, the broader the future cash stream.
Aftermarket: The Cash Engine
That future stream is already swelling. Spare‑part revenue for civil engines jumped 25 % year on year in Q1, while power‑by‑the‑hour service fees grew almost 18 %. Those two lines combined made up nearly two‑thirds of propulsion revenue and carried gross margins well over 40 %. The beauty of the model is that most costs on a mature engine are sunk. Once an airliner rolls off the line, operators are locked into CFM shops for at least the first heavy visit. LEAP engines have not even reached steady shop‑visit cadence yet—only about one‑third of the fleet has crossed its first overhaul threshold. That means a long ramp lies ahead.
Management expects LEAP aftermarket revenue to more than double by the end of the decade. The math behind that claim is easy to verify. Each LEAP is expected to need its first quick‑turn shop event around six to seven years after entry into service. The earliest engines entered service in 2016, so the wave is only now building. By 2030 the LEAP fleet will be larger than the peak CFM56 fleet, and CFM56 parts still bring in over €3 billion a year. The tail on this cash curve should keep throwing off capital even if new‑build rates someday level out.
Defense Adds a Safety Net
While engines pay the bills, Safran is no one‑trick pony. Its Equipment & Defense unit sells landing gear, wheels, brakes, inertial navigation, and guidance systems. That portfolio earned €11.8 billion last year, good for 39 % of total revenue. A rising portion of that mix now comes from military programs. Europe’s renewed defense budgets, the Rafale fighter export boom, and helicopter engine upgrades all feed order growth. Safran also supplies space thrusters and optical payloads—niches that enjoy high barriers to entry and predictable funding. The net result is a steady line that offsets civil swings.
Defense growth also underwrites research. Safran and GE are investing several hundred million euros a year in the open‑fan RISE demonstrator. Early static and dynamic tests on full‑scale composite blades have met design goals, and Airbus has signed on to flight‑test the concept. If RISE meets its 20 % fuel‑burn target, Safran will arrive at the mid‑2030s single‑aisle renewal with a ready platform. The open‑fan bet is bold, yet the firm can afford that gamble because defense and aftermarket cash keep the R&D meter running during civil slumps.
Interiors: From Drag to Lift
Investors often forget the firm’s Aircraft Interiors unit, bought when Safran absorbed Zodiac Aerospace in 2018. The division sells seats, galleys, and cabin equipment and was a headache during the pandemic. That turnaround is now real. In Q1 the group grew revenue 14 % and turned in positive recurring operating profit for a fourth straight quarter, driven by a 3‑fold rise in business‑class seat deliveries and a jump in retrofit spares. The division’s margin is still low‑single digits, yet every tenth of a point adds leverage to group profit. A credible path to a 10 % margin by 2028 would lift group operating leverage without major capex.
Financial Numbers Still Strong
Safran closed 2024 with €27.3 billion in revenue and €4.1 billion in recurring operating profit, a 15.1 % margin that set a record for the firm. Free cash flow hit €3.2 billion, equal to 12 % of sales. The Q1 release kept that pattern alive: sales advanced 16.7 %, profit tracked ahead of plan, and management stuck to guidance calling for another 10 % revenue climb this year plus €3–3.2 billion in free cash flow.
Net debt remains conservative at only 0.8x EBITDA. Safran’s hedge book locks most dollar exposure at EUR/USD1.12 through 2028, avoiding currency swings. The firm did an early redemption of its 2028 convertible bonds in April, shrinking share count and lowering interest bills. It has also bought back 1.7 million shares so far this year under a plan to retire up to €5 billion of equity by 2028. Those moves limit dilution from option grants and keep leverage aligned with the A‑ credit rating.
Valuation Analysis
A quick stock analysis pinpoints a forward P/E near 34x and an EV/EBITDA close to 19x. Skeptics say that leaves no margin for error. Supporters argue the multiples reflect a company with strong economics. Which side is right depends on how one frames cash flow.
If we use the midpoint of 2025 free cash flow guidance—€3.1 billion—and the current €120 billion enterprise value, Safran trades at 3.9 % forward FCF yield. When rates on French 10‑year notes sit near 3.1 %, the equity risk premium is thin. Yet cash flow is likely to rise. Management’s 2028 ambition points to at least €6 billion in annual FCF once interiors margins mature and Collins actuation synergies flow in. That would lift FCF yield toward 6 %. A discounted‑cash‑flow model using 8 % WACC and flat terminal growth values the shares around €320, only 10 % above spot. Using a 9 % discount rate—or assuming the multiple compresses—gives a value closer to €280. In other words, the market has already priced in much of the good news but not all of it.
Comparisons help. Rolls‑Royce trades near 43x forward earnings and carries more debt and a turnaround narrative. MTU Aero Engines trades around 24x with slower growth and a heavier exposure to Pratt & Whitney’s troubled geared turbofan. Leonardo looks cheap at 20x but earns half the margin and has much less cash conversion. Against that peer set, Safran’s premium is understandable. For long‑horizon investors, I view the current price as fair rather than expensive.
Reading the Risks
Supply chain tightness remains the issue that keeps managers up at night. Castings, forgings, and electrical parts still form bottlenecks. Airbus now believes its own ramp to 75 A320s a month may slip by a quarter, and any pause there would knock engine demand. If Pratt & Whitney finally solves its geared‑turbofan durability woes, Airbus could push more volume to that option, trimming LEAP share on the A320 family.
Tariff tension between Europe and the United States is another shadow. Safran’s plan assumes no duties on aero parts. The firm is lobbying hard in Brussels and Washington and has mapped diversification of repair work across free‑trade zones, but the flow‑through of a 10 % duty could shave 100–150 basis points off group margin. A surprise euro surge beyond hedge collars in 2027 would also dent future reported profits.
Technology disruption is further out but cannot be ignored. Full electric flight is unlikely for narrow‑body missions this decade, yet hybrid propulsion and hydrogen combustion could upend the current engine hierarchy in the 2040s. Safran’s multi‑billion‑euro bet on open‑fan tech is a hedge, yet major leaps in battery density or fuel‑cell efficiency would challenge even that plan. The good news is that airlines and lessors are among the most conservative buyers on earth; they adopt new propulsion only after safety and economics are proven. Safran, with its balance sheet and learning curve, is well placed to pivot if needed.
Final Call
A year ago, buyers of Safran got both growth and rerating upside. Today, most of the rerating is history, but the growth story is alive. Engines will keep flowing, shop visits will climb, and the interiors unit that once dragged on profit now adds lift. Defense cash fills in the gaps, and a lean capital policy pushes excess funds back to shareholders.
At €285 the stock will likely not repeat its 2023 heroics, yet I still see a path to high‑single‑digit annual returns built from 10 % earnings growth, a 1 % dividend that rises with profit, and occasional buyback tailwinds. For investors hunting a European industrial that blends pricing power with secular growth and a safety valve in defense, Safran remains best‑in‑class. I keep a Buy stance, with the humble note that timing matters: adding on market pullbacks or during any future engine‑delivery scare will improve entry yields. In the meantime, this is one quality compounder worth putting in a long‑haul portfolio and forgetting about until the next cycle turns.