IAG share price heads south even as group hikes earnings target

British Airways parent sticks to ROIC target

IAG share price heads south even as group hikes earnings target

Shares in International Consolidated Airlines Group (LON:IAG) have fallen deep into the red this morning, even as the British Airways parent hiked its core earnings targets for the 2018-2022 period. The company, which also owns Iberia, Aer Lingus and low-cost airlines Level and Vueling, however, has disappointed analysts my maintaining its return on invested capital (ROIC) target unchanged.

As of 10:24 GMT, IAG’s share price had given up 1.90 percent to 619.00p, underperforming the broader UK market, with the benchmark FTSE 100 index currently standing 0.30 percent higher at 7,577.74 points. The group’s shares have added more than 37 percent to their value over the past year, and are up by some 40 percent in the year-to-date.

IAG holds Capital Markets Day

The British Airways parent said in a Capital Markets Day update this morning that it would target EBITDAR of approximately €6.5 billion average per annum in the 2018-2022 period, compared with €5.3 billion average per annum for 2016-2020. The group is also lifting its capex target to €2.1 billion per year, compared with its current €1.7-billion per year target.

IAG will further aim for equity free-cash flow average of €2.5 billion per annum for the 2018-2022 period, compared to its current annual range of between €1.5 billion and €2.5 billion.

ROIC disappointment

The FTSE 100 group, however, maintained its 15-percent ROIC target unchanged.

“No increase in ROIC target of 15 percent, which is disappointing, and we expect today’s CMD to focus on how profit guidance is being raised but no lift to the return target,” analysts at Goodbody said in a note, as quoted by Reuters.

The update comes after IAG recently posted a rise in profits for the third quarter of the year, while revealing that its unit revenue growth had slowed. 

As of 10:43 GMT, Friday, 03 November, International Consolidated Airlines Grp share price is 621.36p.

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