- International Consolidated Airlines Group SA (CDI)
- 03 May 2024 17:21:04
Source: Sharecast
The bank said IAG's 2Q23 EBIT of €1.25bn beat its/consensus estimates by 28%/40% on better-than-expected unit revenues.
"In the earnings call, management said it had seen no signs of demand weakness and 3Q trends were similar to 2Q's," it noted.
It also noted that IAG plans to increase capacity to 97% of 2019 levels in 2023 with 4Q23 above 2019 levels.
BofA lifted its 2023 EBIT estimate by 26% to €3.3bn, driven by the 2Q beat and its 3Q higher unit revenue.
The bank said the target price increase is down to its higher earnings estimate.
"We lower our target multiple to 4.5x (from 4.9x) because the earnings recovery is faster than we expected," it said.
"IAG is well-placed to return to its pre-pandemic EBIT margin of 12-14% given its track record of cost control, in our view. We reiterate our buy."
Elsewhere, analysts at Berenberg revised up their target price for British aerospace, defence and nuclear engineering services outfit Babcock.
Foremost, they highlighted how the company had been delivering on the turnaround plan announced by its new management in 2021.
Furthermore, the disposal programme had been upsized by more than half to £640m, cash flow stretches of about €470m had been unwound, its free cash flow had inflected and the balance sheet was in a much stronger position.
They also termed the company's medium-term guidance for the first time "an important milestone".
And trading on a price-to-earnings multiple of 9.4 the shares remained "attractively" valued.
Indeed, they estimated the discount that they were trading at versus UK defence sector peers for 2035 at 30%.
On the back of all of the above they upped their target price from 400p to 450p and reiterated their recommendation to 'buy'.