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Investing.com -- Goldman Sachs upgraded International Consolidated Airlines Group, the parent of British Airways, Iberia and Aer Lingus, to a “buy” rating from “neutral,” pointing to strong financial flexibility and improving trading conditions into the winter.
The brokerage set a 12-month price target of 470p, up from 400p, implying a 19.3% upside from IAG’s closing price of 393.8p.
The note dated Wednesday said trading is “sequentially improving into winter” as premium travel demand strengthens and transatlantic capacity remains tight.
IAG, with a market capitalization of £19.3 billion, reported revenue of €32.1 billion in 2024 and is forecast to generate €33.5 billion in 2025.
Operating profit is projected to rise to €4.99 billion in 2025 and €5.15 billion in 2026, up 3% year over year.
Goldman Sachs also raised its earnings-per-share estimate for 2026 to €0.79 from €0.74, noting that the increase is “largely driven by our buyback assumption.”
Analysts Patrick Creuset, Dan-Arthur Coseru and Nathan Arnaud said that IAG’s improved leverage position allows for more shareholder returns.
“We see IAG ending the year on 0.9x Net debt/EBITDA,” the brokerage said, compared with the airline’s target range of 1.2x to 1.5x.
“We see at least 0.3x turns of headroom for additional shareholder returns,” they added.
Jefferies models a new €2 billion share repurchase program running through 2026, equal to about 10% of IAG’s market value.
Goldman Sachs said that despite upgrades to profit forecasts, 2025 EBIT estimates have been lifted by more than 10% since the first half of the year, the stock’s performance has lagged, gaining only about 3% in euro terms since February.
The analysts said the airline’s balance sheet, transatlantic exposure and cash generation underpin the case for re-rating, adding that “continued strong buyback support” and low fleet growth make IAG’s outlook more favorable relative to peers.
The brokerage noted that IAG’s shares trade at 5.7 times projected 2026 earnings, compared with 8.4 times for major U.S. carriers and 12 times for Ryanair.
Goldman Sachs said there is “scope to narrow the current valuation gap vs. US peers,” reinforcing its upgrade.
Risks cited include potential softening in travel demand, higher competitor capacity, and rising environmental costs tied to sustainable aviation fuel and emissions trading. Still, the analysts pointed to the company’s premium-travel exposure as a key advantage.