MTU Aero Engines: Downgrade to Neutral

BofA Securities downgraded MTU Aero Engines to Neutral from Buy and cut its price objective to EUR370 from EUR440, with the shares at EUR345.80. MTU's 3Q26 was mixed, but the bigger concern is the earnings trajectory into 2027. Commercial OE disappointed, with organic growth guidance cut to mid- to high-single digits from mid- to high-teens, although MRO and military remained solid. Beyond 2026, the analysts see two growing headwinds: a softer spare-engine outlook and lower LeaseCo income, both of which should pressure margins. V2500 is an additional concern, with flown thrust now c.45% below FY19 levels, pointing to a decline in shop visits from late 2027 accelerating into 2028. Commercial MRO USD growth guidance was raised to mid-teens from low- to mid-teens, with commentary remaining positive, airline behaviour unchanged, low retirements and stable forward V2500 inductions. FCF of EUR172m exceeded EUR109m consensus, supported by lower GTF compensation payments, military PdPs and hig