CFRA lifts IAG stock rating to Strong Buy, maintains GBP4 target

On Friday, CFRA analyst at the research firm upgraded International Consolidated Airlines Group (LON:ICAG) SA (IAG:LN) (OTC: ICAGY (OTC:ICAGY)) stock rating from Buy to Strong Buy, maintaining a price target of GBP4.00. The upgrade aligns with InvestingPro data showing ICAGY’s impressive 71% return over the past year and strong analyst consensus. The upgrade reflects the firm’s confidence in the airline’s financial performance and growth prospects.

The analyst’s decision to raise the stock rating is based on a forward price-to-earnings (P/E) multiple of 7.4x the company’s projected 2026 earnings per share (EPS). This valuation represents a +1.5 standard deviation above the three-year average valuation prior to the pandemic, from April 2017 to March 2020. The analyst cited IAG’s strong post-pandemic recovery, improved balance sheet, and strategic diversification across leading European carriers as reasons for the premium valuation.

IAG recently reported robust first-quarter results for 2025. The company’s revenue reached EUR7.04 billion, core operating profit hit EUR198 million, and net profit was EUR176 million. These figures surpassed consensus estimates, which had anticipated revenue of EUR6.82 billion, operating profit of EUR147 million, and a net loss of EUR26 million. InvestingPro analysis reveals the company maintains a "GREAT" financial health score of 3.55, with particularly strong marks in profitability and relative value.

The airline’s operating profit before exceptional items experienced a significant year-over-year increase of 191% to EUR198 million. This profit surge was attributed to a strong revenue growth of 9.6% and an improved operating margin of 2.8%, which was up by 1.7 percentage points.

Looking forward, IAG is optimistic about its performance for the remainder of the year. Trading at an attractive P/E ratio of 6.26x and currently undervalued according to InvestingPro Fair Value analysis, the company has maintained its full-year capacity growth guidance at approximately 3%. Management highlighted the continued strong demand across its network, with particular strength in the Latin American and European markets.

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