Bank of America Merrill Lynch lifted its price target on BA and Iberia owner IAG on Monday to 260p from 240p and reiterated its ‘buy’ rating on the shares after results last week.
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."
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