The powerful rebound recorded by IAG shares since the presentation of the results (last Friday) places the holding company which owns companies such as Iberia, British Airways and Vueling in first place. the most optimistic company in the Ibex 35 after overtaking Banco Sabadell, who was the one who previously held this position. The airline has already gained more than 61% on the stock market since January 1, and marks its most bullish year since its stock market debut.
The airline group presented financial results for its third quarter of the year which completely convinced analysts (with a majority increase in valuation) and investors, with a rebound of almost 10% since last Friday. Thanks to strong travel demand during the summer season and its commitment to long-haul connectivity on both sides of the Atlantic, IAG recorded an after-tax profit of 2.34 billion euros, or 8. 8% more than the previous year (which was 2.151 million euros). ).
Bank of America is one of the companies that increased IAG’s valuation after the results, giving it 29% upside potential. “Our valuation increases to 3.6 euros per share (from 2.8 euros previously), as we move our valuation to 2025. We expect Ebit margins above 13% in the medium term, in line with the forecast of 12 -15%, taking into account IAG’s historical trajectory of cost control and increasing contribution from light active segments (Holidays, Loyalty). We reiterate our Buy rating due to strong margins, balance sheet strength and attractive yields.“, indicates the firm.
BofA also highlights that IAG has announced a new share buyback amounting to 350 million euros (2.7% of market capitalization) which will last until February 2025. A measure is added to the interim dividend declared in the first half. “We forecast EPS of 7.5 euro cents for 2024, with profitability of 2.7%. The investment forecast for 2024 has been reduced to 3.1 billion euros, and our FCF estimate [free cash flow] amounts to approximately 2.3 billion euros (profitability of 16%)”, they conclude.
Barclays also raises the airline’s price target after the results, from 2.90 euros previously to 3.20 euros, and continues to advise taking positions in its securities. “IAG has outperformed its European peers thanks to its exposure to healthy North and South Atlantic markets, supported by weak competitive capacity in the London-US markets. The lack of exposure to Asia is useful at the moment “The United States’ main national markets: the United Kingdom and Spain compare favorably to the rest of Europe,” the firm says.
Thus, among the 20 analysis firms which examine IAG securities after their results, among the analysis houses which collect Bloomberg, 15 increase their rating. Compared to current levels, IAG shows an increase of almost 12%, to reach 3.23 euros.
From Bloomberg Intelligence They also see an increase in margins in the second half. “IAG’s strong passenger demand in key markets and British Airways’ operational efficiency measures are overshadowing capacity reductions and disruption. This is expected to lead to strong margin growth in the second half.” Unit revenue has increased in the third quarter, despite Air France’s difficulties. -KLM and Lufthansa, thanks to North American and European routes, but Asia-Pacific shows weakness and the recovery in business travel could continue gradually,” they explain..
The tourism and travel sector which encompasses the Stoxx 600 is gaining 12% over the year and IAG is also the most optimistic company within it, with a distance of up to 17 points with the second which increases the most, namely Flutter Entertainment, with an annual revaluation of 44%.
