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On Wednesday, CFRA analyst Alan Lim Seong Chun updated the financial outlook for International Consolidated Airlines Group (LON:ICAG) SA (IAG:LN) (OTC: ICAGY (OTC:ICAGY)), lifting the price target to GBP3.70 from the previous GBP3.30. The firm continues to endorse a Buy rating on the airline’s shares. With a market capitalization of $21.19 billion, IAG has demonstrated remarkable performance, delivering a 141.23% return over the past year. According to InvestingPro analysis, the stock is currently trading near its Fair Value.
The upward revision of the price target is grounded on a forward price-to-earnings (P/E) multiple of 7.4x, which signifies a valuation 1.5 standard deviations above the three-year average prior to the pandemic, spanning from April 2017 to March 2020. CFRA’s decision to enhance the premium is due to the sustained strong load factor and margin trends observed in the industry. InvestingPro data reveals the company maintains an excellent financial health score of 3.82, with a current P/E ratio of 7.25x, suggesting attractive valuation metrics. Subscribers can access 12 additional ProTips and comprehensive financial analysis.
The International Air Transport Association’s (IATA) data for 2024 revealed a 10.4% year-over-year increase in passenger demand, measured by revenue passenger kilometre (RPK), which surpassed the 2019 level by 3.8%. Additionally, the global load factor, an indicator of airline capacity usage, saw an improvement of 1.3 percentage points to 83.5%. IAG’s revenue growth of 9.3% year-over-year aligns with this industry trend, while maintaining a healthy gross profit margin of 27.02%.
December 2024 continued to show robust growth in passenger demand, with an 8.6% year-over-year rise in RPK and a load factor enhancement of 2.3 percentage points, reaching 84.0%. Europe’s performance was particularly strong, with a 7.3% year-over-year increase in RPK and a load factor rise of 1.6 percentage points to 86.5%.
CFRA’s positive outlook is bolstered by the belief that the vigorous demand for air travel, both in Europe and globally, will likely lead to increased margins and earnings for IAG. The firm stands by its earnings per share (EPS) estimates for 2024 at EUR0.53 and for 2025 at EUR0.60. For deeper insights into IAG’s valuation and growth prospects, access the comprehensive Pro Research Report available exclusively on InvestingPro.
In other recent news, International Airlines Group (IAG) announced a successful third quarter, with revenue rising by 7.9% and operating profit increasing by 15.4% to over €2 billion. The group also reported a significant reduction in net debt and unveiled a €350 million share buyback program. Despite industrial action affecting Aer Lingus, other airlines in the group, including British Airways, performed strongly. IAG anticipates continued financial strength, with plans for capacity growth and shareholder rewards.
In related developments, Bernstein analysts maintained a positive outlook on several European airline stocks, including Ryanair, IAG, and Wizz Air. Ryanair is expected to generate an average of €2-€2.5 billion in free cash flow annually as capital expenditures decrease. IAG, favored for its focus on the Americas and absence of competition from Norwegian’s long-haul low-cost flights from London, is expected to see additional earnings per share accretion through its buyback program. Wizz Air, despite recent engine grounding challenges, is anticipated to recover its unit cost as growth returns.
These recent developments highlight the ongoing transformations and financial performances of these airlines. The information, provided by IAG and Bernstein analysts, offers insights into the airlines’ operations, financial health, and future expectations.
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