MTU Aero Expected to Match Peers as Fleet Retirement Fears Fade

Dow Jones10-02

0824 GMT - Citi analysts dismiss concerns that MTU Aero's V2500 aircraft turbofan engine fleet will retire faster than CFM International's competing CFM56 turbofan jet engine. According to the analysts, both narrowbody engine models average roughly 16.5 years in age, and the vast majority of both fleets will be retired within the next decade. The German engine manufacturer's forward earnings growth is expected to remain on par with peers, with cash flow conversion surging toward 80% to 90% as geared turbofan compensation payments--the financial settlement paid by engine manufacturer Pratt & Whitney--end and long-term service agreements grow, Citi says. "We see a strong case for partial closure of MTU's valuation discount to peers," Citi says. Shares are up 0.2% at 369.30 euros.

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