Table of Contents
- Company profile MTU Aero Engines – DAX-listed company in the oligopolistic market for engine maintenance
-
The latest MTU Aero Engines quarterly figures for March 2025
- MTU Aero Engines stock forecast for 2025
- MTU Aero Engines Levermann analysis: Key figures
- Evaluation of MTU Aero Engines stock
The aviation industry is considered capital-intensive, unprofitable, and highly competitive. US legend Warren Buffett summed it up aptly in his 2007 shareholder letter: "The worst sort of business is one that grows rapidly, requires significant capital to engender the growth, and then earns little or no money. Think airlines. Here, a durable competitive advantage has proven elusive ever since the days of the Wright Brothers." Does this make the aviation market a bad sector for investing in stocks?
No, as we will see. There are a number of oligopolies in this sector, i.e., markets dominated by a few providers.
Many people are probably thinking of the duopoly of aircraft manufacturers Boeing and Airbus, but that is not the market we are concerned with today.
In the supply chains surrounding aircraft, the German company MTU Aero Engines (ISIN: DE000A0D9PT0) has carved out a leading position in the market for aircraft engine maintenance.
Source: MTU Aero Engine stock price
Over the past 20 years, the share price has risen more than sixteenfold, weathering several volatile phases such as the global financial crisis of 2008 and the coronavirus crash of 2020, when the stock lost more than 50 percent of its value. The share price has now reached a new all-time high of €374. Will this performance continue unabated? What exactly does MTU Aero Engines do, and why is it so important for the global aviation market? We explore these questions in our MTU Aero Engines stock analysis.
Company profile MTU Aero Engines – DAX-listed company in the oligopolistic market for engine maintenance
While aircraft engine manufacturers such as Rolls Royce, GE Aerospace and Raytheon Technologies (which includes engine manufacturer Pratt & Whitney) focus on the development and production of engines for civil aviation and the military, MTU specializes in the maintenance and repair of commercial engines (MRO: Maintenance, Repair & Operations). The Bavarian company is also involved in the development and parts production of certain engines.
Due to geopolitical developments, the Munich-based company is now also moving into defense and offers maintenance services for engines for combat helicopters and the Eurofighter.
However, the focus remains on the civil aviation market, as the following figure shows.
Source: MTU 2025
There are currently almost 19,000 engines in service that are maintained by MTU Aero Engines. By 2035, the management of the DAX-listed company expects this figure to rise to around 28,000 engines. MTU's engine fleet is expected to grow by 4 percent annually, while the total market for all engines in use worldwide is expected to grow by only 3.6 percent per annum. Management expects that 66 percent of the engines will be used in passenger aircraft in 2035.
An overview of all engines maintained by MTU Aero Engines can be found in the 2024 annual report.
Source: MTU Annual Report 2024
We see a variety of abbreviations for engines, which are divided into maintenance, development/manufacturing, commercial (civil aviation) and military.
MTU further divides the commercial segment into widebody jets (large aircraft, usually long-haul aircraft), narrowbody/regional jets (aircraft for short and medium-haul flights), and business jets (business aircraft). Military engines are offered for fighter jets, helicopters, and transport aircraft.
The company offers a wide range of engines for the development, manufacture, and, in particular, maintenance of civil engines.
MTU Aero Engines' partnerships and networks
Let's return to the diagram showing the various engines. What initially appears to be a random collection of letters actually indicates the strength of the business model and the associated moat surrounding MTU.
Thanks to its decades of experience, MTU has built up a broad network of partnerships with engine manufacturers, as shown in the diagram.
Particularly noteworthy are the partnerships with GE Aerospace and Raytheon Technologies, which includes the American manufacturer Pratt & Whitney.
The GE90 and CF6 series engines developed by GE have been maintained by MTU for many years. The GEnx, GE9X and GP7000 (a joint venture between GE and Pratt & Whitney) will be added shortly. MTU is also involved in the production of GE engines such as the CF6 and GE9X. This results in high switching costs for GE, as the know-how and jointly developed technology of the engines cannot be offered by any other competitor. This ensures predictable sales for MTU.
This also applies to the cooperation with Pratt & Whitney. The manufacturer of mainly short- and medium-range engines has cooperated with MTU on many GTF (geared turbo fan) engine models, with the PW1100 series, which is considered particularly fuel-efficient, being particularly noteworthy.
These two partnerships guarantee sustainable revenues for the Munich-based company. MTU Aero Engines also has a strong network of other MRO service providers. In 2019, MTU Aero Engines founded the joint venture EME Aero in Poland together with Lufthansa Technik (a subsidiary of Lufthansa AG), which will now maintain GTF engines in eastern Poland.
With its many years of expertise and broad network of partnerships, MTU Aero Engines is so deeply integrated into the maintenance processes of airlines and engine manufacturers that the DAX-listed company is virtually impossible to displace from the market.
Revenue mix MTU Aero Engines
Let's take a look at the breakdown of MTU Aero Engines' revenue.
Source: Annual Report MTU Aero Engines 2024
Of the €7.4 billion in revenue, around €5 billion came from the maintenance business for civil engines, representing a share of 68 percent. The civil engine production and development division generated €1.8 billion, making it the second most important sector for the Munich-based company with a share of around 25 percent of revenue. The military engine business generated €612 million, which corresponds to an 8 percent share of total revenue.
The civil engine business accounts for over 90 percent of the Munich-based company's total revenue, once again highlighting its importance for the company.
The latest MTU Aero Engines quarterly figures for March 2025
MTU Aero Engines recently announced its quarterly figures. The reaction of the share price was hardly noticeable, falling by 0.4 percent.
Source: StocksGuide earnings calendar
This reaction is somewhat surprising given the Munich-based company's excellent figures. Revenue rose by 28 percent to €2.11 billion. Due to lower production costs, gross profit even increased by 42 percent. EBIT rose by 67 percent to €314 million.
Source: Q1 2025
Net profit (TTM) increased by 77 percent compared to the same quarter last year. It was reported at €224 million.
These quarterly figures are very good for a company in a cyclical sector. The post-coronavirus catch-up effects from 2022-2024 could be largely exhausted. This makes the high organic growth of the Munich-based DAX-listed company all the more impressive.
MTU Aero Engines stock forecast for 2025
Analysts' forecasts are optimistic and predict further revenue growth in the coming years.
Source: Revenue estimates
The expected revenue of €14.6 billion in 2032 would be almost double that of 2024. This would correspond to an annual growth rate of 7.8 percent, which would be a very good figure for an established company. Added to this is the cyclical nature of the air travel market, which is vulnerable to many events such as natural disasters, geopolitical tensions and conflicts, or an economic downturn.
These high expectations are likely to be based primarily on MTUs market position.
Experts are even more optimistic about profitability.
Source: MTU estimates
The average net profit forecast for 2029 is €1.4 billion. This would be more than twice as high as the annual profit for 2024. The annual growth rate would be 14 percent, which would be disproportionately higher than the increase in sales.
It remains to be seen whether the analysts' forecasts will prove accurate. However, given the Munich-based company's comfortable market position, these growth rates are by no means utopian.
MTU Aero Engines Levermann analysis: Key figures
The MTU Aero Engines stock is currently rated at 3 points according to the Levermann Strategy. It is just 1 point short of a place among the top scorers.
Source: StocksGuide Levermann strategy
The DAX giant scores particularly well in terms of price growth (2 points) and in segments related to net profit.
Another positive highlight is the equity ratio, which contributes another point. At around 27 percent, it exceeds the required threshold of 25 percent.
There are deductions for the valuation.
The security is valued quite ambitiously with a price-earnings multiple of 24 based on current-year earnings. Over the last five years, the price-earnings ratio (P/E ratio) was 38. However, we must not forget the distorting effects of the pandemic years, when large parts of the air traffic market came to a standstill at times and MTU's earnings were correspondingly low.
The return on equity and EBIT margin narrowly missed out on a point. At 18 percent, the return on equity is only slightly below the required 20 percent, and the EBIT margin comes in at 11 percent. A score of 12 percent would have earned a point here as well.
MTU Aero Engines stock score well according to the Levermann strategy thanks to good price growth and good profit growth. Points are deducted for the increased valuation of the Munich-listed stock.
Evaluation of MTU Aero Engines stock
Let us now turn to the valuation of MTU Aero Engines stock.
Source: MTU key performance indicators
The price-earnings ratio (P/E) is currently 32; based on expected annual earnings, it is 24. This factor does not appear favorable when the cyclical nature of the aviation market is taken into account. Investors currently seem willing to pay a certain premium for one of the market leaders in this sector. The price-to-book ratio (P/B) also appears high at 6. The enterprise value/sales (EV/Sales) ratio of 2.8 also appears unfavorable for an asset-heavy business model such as engine maintenance.
MTU Aero Engines compared with Safran
The largest player in the engine MRO business is the French company Safran (ISIN: FR0000073272). There are also a number of smaller competitors, but these are not listed on the stock exchange.
Safran's market capitalization is significantly larger than that of MTU.
Source: Safran & MTU StocksGuide
Safran's market capitalization of €115 billion is more than five times that of MTU Aero Engines at €20 billion.
Due to strong fluctuations in net income and free cash flow (FCF), we focus on the price-to-book ratio (P/B) and enterprise value/sales (EV/sales) when comparing the two companies.
We have already identified a certain premium in the valuation of MTU stock. Investors are currently willing to pay an even higher premium for Safran. The price-to-book ratio (P/B) for the French company is currently at a record high of 11. This is well above the average for the last 20 years, which is below 4. The EV/sales ratio of 4 is also twice as high as the average for the last two decades. Both figures are significantly above the valuation parameters for MTU stock.
One possible explanation for this high divergence could be the return on capital employed, or ROCE (Return on Capital Employed).
Source: Safran & MTU
With a value of around 23 percent, Safran is currently able to generate 23 cents EBIT for every euro of capital employed. This is significantly higher than the 13 percent achieved by MTU Aero Engines. Furthermore, Safran appears to have decoupled itself from MTU in this regard since 2022. Looking ahead 20 years, both companies are on average on par with each other. However, Safran has made up for the ground it lost during the 2009 financial crisis.
All in all, the valuations of both companies appear inappropriate. Better entry opportunities could arise for investors if both securities return to their multiples or below their average values.
Should you buy MTU Aero Engines stocks in 2025?
Based on our analysis, we conclude that MTU Aero Engines stock is not cheap, but there are few companies that are so closely tied to their customers, which stabilizes sales in the otherwise cyclical aviation business.
Investors in MTU also receive a share of the annual profit in the form of a dividend. However, the current dividend yield is only around 0.6 percent, which does not make it particularly attractive even for dividend-focused investors.
Source: MTU dividend
Added to this is the cyclical nature of the business model. MTU had to completely cancel its dividend in 2020 as a result of the coronavirus pandemic and has also reduced its profit distribution for 2024 compared with 2023.
Analysts currently rate the stock similarly ambitiously. Although more than half of the experts recommend buying the stock, the average price target is below the all-time high that the stock recently reached.
Source: MTU stock forecast
A third of experts, though, are just holding their ground. 12 percent of analysts would sell the stock.
The ratings for this year are just as mixed as the overall expert opinions.
Source: MTU Upgrades & Downgrades
In addition to one recommendation to sell, there are three other recommendations to buy. Three banks have also rated the stock as a hold. Investors cannot therefore rely on a uniform opinion from the experts and should draw their own conclusions.
Nevertheless, the Munich-based DAX-listed company is now an integral part of the engine maintenance sector and could continue to delight investors in the future.
In this case, an EV/sales alert of 1.5 or below could represent a favorable entry point.
The author and/or persons or companies associated with StocksGuide own or may own shares of MTU Aero Engines. This article represents an expression of opinion and does not constitute investment advice. Please note the legal information.
