Credit Suisse hikes its target price for IAG
Shares in IAG may have gained recently on the back of fuel price weakness, but they do not reflect the improvement seen at its Spanish subsidiary, Iberia.
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The latter is the result of management’s success in re-structuring the company’s operations, Credit Suisse explained to clients in a research note on Monday.
As well, stock in the company is trading at an enterprise value to operating profits multiple (EV/EBITDAR) for next year of just five, versus peers Lufthansa at 5.5 and Delta at four.
Furthermore, potential exists for further operational improvements at the Spanish unit, as the company itself laid out at an investor update on 12 December. The key themes of the presentation were the modernisation of the firm’s product, pricing and cost structure.
That is to complement a 25% reduction in headcount and comes after the outfit matched British Airways lease-adjusted EBIT margin of 15% in the third quarter just ended.
Also, and simply as a function of the above mentioned drop in fuel prices, the broker lifted its estimate for earnings before interest and taxes next year by 6% to €2bn.
For all of the above reasons, analyst N.Glynn hiked its price target on the shares to 654p from 618p previously, albeit while maintaining an outperform recommendation.