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Investing.com -- European airport operators are trading near fair value after strong year-to-date gains, with Morgan Stanley finding limited upside across the sector amid flat earnings, soft retail performance, and heightened regulatory risks.
The brokerage said the segment has gained about 2% year to date, outperforming the MSCI Europe Index by roughly 6%, but without corresponding earnings upgrades.
The stocks trade at about 10x one-year forward EV/EBITDA with dividend and free cash flow yields around 4%, levels Morgan Stanley described as “pretty much fair value” for the group.
The note dated Monday said solid passenger traffic into the 2025-26 winter season is offset by weak retail trends, leaving earnings “moving sideways.”
The brokerage upgraded Groupe ADP to “overweight” from “equal-weight” and maintained Aena as its favored airport play, while cutting Fraport AG to “equal-weight” from “overweight” after a strong run and trimming Athens International Airport to “underweight” from “equal-weight” on cost and margin pressures.
Zurich Airport (FHZN.SW) remained “underweight” on valuation grounds despite steady traffic and cost control.
Morgan Stanley said ADP’s Paris Airports business trades on the “least demanding valuation” among peers, with shares reflecting an estimated 35%-40% discount to the regulated asset base (RAB) and a 9.4x–8.2x 2025–26e EV/EBITDA multiple, compared with about 13x for Aena and Zurich.
The brokerage said the current market view bakes in too much regulatory risk ahead of the French regulator’s December 2025 draft proposal for the next multi-year framework.
ADP’s 2026e dividend yield is projected at 3.5%, with an implied equity internal rate of return (IRR) of 11%, the highest among covered peers.
Aena retained its “overweight” rating, supported by a 2026e dividend yield of 5.2%, EV/EBITDA of 9.7x, and an implied equity IRR of 9.2%.
The operator is expected to benefit from longer-term de-risking tied to the June 2026 CNMC review of Spain’s DORA III regulatory plan and planned terminal and retail expansions.
Fraport’s downgrade reflected limited near-term catalysts following a 2027e free cash flow yield of about 6%. Its valuation stands at 10.9x 2026e EV/EBITDA and 2.6% dividend yield.
Athens International Airport’s valuation, at about 10.1x 2026e EV/EBITDA and 6.5% dividend yield, was described as “stretched,” with net income and dividend per share trends facing pressure from tariff cuts and opex inflation.
Zurich Airport, trading near 11x 2026e EV/EBITDA and a 3.3% dividend yield, offers solid traffic growth into 2026 but faces medium-term downside from expected tariff resets and limited regulatory headroom.
Morgan Stanley said the overall EU airports segment looks like a “stretched elastic band,” with valuations elevated and little scope for earnings upgrades over 2025–27.
The brokerage added that only selective opportunities remain for investors willing to move up the regulatory risk curve, with ADP and Aena offering the most attractive balance of return potential and contained risk.