The powerful rebound that IAG shares have recorded since it presented results (last Friday) places the holding company that owns companies such as Iberia, British Airways or Vueling as the most bullish company on the Ibex 35 after surpassing Banco Sabadell, which 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 it began trading.
The airline group presented financial results for its third quarter of the year that completely convinced analysts (with an increase in valuation by the majority) and investors, with a rebound of almost 10% since last Friday. Thanks to the strong demand for travel during the summer season and its commitment to long-haul connectivity on both sides of the Atlantic, IAG recorded a profit after tax of 2.34 billion euros, 8.8% more than the previous year (which were 2,151 million euros).
Bank of America is one of the firms that increased IAG’s valuation after the results, and gives it an upside potential of 29%. “Our valuation rises to 3.6 euros per share (from the previous 2.8 euros), as we move our valuation to 2025. We expect ebit margins above 13% in the medium term, in line with the 12-15 forecast %, given IAG’s track record of cost control and growing contributions from asset light segments (Holidays, Loyalty). We reiterate our buy rating due to the strength of the margins, the solidity of the balance sheet and the attractive returns“, indicate from the firm.
BofA also highlights that IAG announced a new share buyback worth 350 million euros (2.7% of the market capitalization) that 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%. Capex forecasts for 2024 were reduced to €3.1 billion, and our FCF estimate [free cash flow] increases to around 2,300 million euros (profitability of 16%)”, they conclude.
Barclays also increases the airline’s target price after the results, from the previous 2.90 euros to 3.20 euros, and continues to advise taking positions in its securities. “IAG outperformed its European peers thanks to its exposure to the healthy North and South Atlantic markets, supported by weak competitive capacity in the London-US markets. The lack of exposure to Asia is helpful at the moment. The main national markets of the United Kingdom and Spain compare favorably with the rest of Europe,” the firm argues.
Thus, of the 20 analysis firms that review IAG titles after their results, among the analysis houses that collect Bloomberg, 15 raise their rating. From current levels, IAG has a rise of almost 12%, reaching 3.23 euros.
From Bloomberg Intelligence They also see an increase in margins in the second half of the year. “IAG’s strong passenger demand in key markets and British Airways’ operational efficiency measures overshadow capacity cuts and disruption. This is likely to lead to strong margin growth in the second half. “Unit revenue increased in the third quarter, despite the difficulties of Air France-KLM and Lufthansa, thanks to North American and European routes, but Asia-Pacific shows weakness and the recovery in corporate travel could continue gradually,” they explain.
The tourism and travel sector that encompasses the Stoxx 600 gains 12% in the year and IAG is also the most bullish company within it, with a distance of up to 17 points with the second that rises the most, which is Flutter Entertainment, with an annual revaluation of 44%.
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