Shares in International Consolidated Airlines (LON:IAG) closed higher in London yesterday as UBS turned bullish on the British Airways and Iberia parent. The move comes as the company, which also owns Aer Lingus and low-cost carriers Vueling and Level, prepares to post its first-quarter results on May 10.
IAG’s share price closed 1.98 percent higher at 546.00p yesterday, outperforming the benchmark FTSE 100 index which ended trading 0.17 percent up at 7,440.66p. The group’s shares have given up more than 13 percent of their value over the past year, as compared with less than a one-percent fall in the Footsie.
Pressure on IAG share price overdone
UBS lifted its rating on IAG from ‘neutral’ to ‘buy’ yesterday, with a price target of 705p on the stock. Sharecast quoted the broker as arguing that share price pressure was now overdone. The analysts reckon that the British Airways parent is trading close to trough multiples, meaning the probability of it de-rating further is low.
UBS also argues that the summer demand environment should be supported by less geopolitical uncertainty in the UK, while an improved trend on North Atlantic pricing in the second quarter and European capacity discipline over the summer gives the bank confidence in its positive full-year pricing of +2% versus market implied of -2%.
UBS trims earnings per share estimates
Sharecast reports, however, that the Swiss bank had cut its 2019/20 earnings per share estimates by nine percent due to changes in currency, yield outlook, fuel price and the impact of the IFRS 16 accounting standard.
“While we now see 2019 estimated EBIT below 2018 levels we think our forecasts are conservative and if IAG sees a strong summer season that estimates will see upside risk,” UBS pointed out, adding that its estimates were below consensus with the market still having “to adjust for IFRS16 and recent oil price change”.