IAG share price is facing turbulence: will earnings help to turn the tide?

IAG share price has come under pressure this year as the ongoing US-Iran war has disrupted its business. It dropped to 366p on Wednesday, down from the year-to-date high of 465p. Focus now shifts to its earnings, which will provide more information on its business during the war.

Soaring jet fuel prices are hurting airlines 

IAG and other airlines are facing a major challenge as the ongoing US-Iran conflict continues, pushing jet fuel prices much higher. Data shows that the average jet fuel price stands at $181 per barrel, up by 101% from a year earlier. It has dropped by 3.8% from the previous month.

The soaring jet fuel price is one of the main reasons why Spirit Airlines collapsed last weekend. It is also the main reason why Lufthansa recently canceled 20,000 flights.

On the positive side, IAG will be less impacted by the crisis than its American peers because of hedging techniques. Historically, the company spends millions of dollars in hedging future prices. This is unlike companies like Delta and United, which focus on the spot market.

The other positive side is  that IAG is less exposed to the Middle East, where traffic has remained under pressure since the war started. Instead, most of its business is in Europe and the transatlantic routes, which are the most profitable. 

Traffic to and from the Middle East has started to stabilize as the ceasefire has continued. In its trading statement, Rolls-Royce Holdings noted that business in the region had become comparable to pre-war levels.

IAG to publish earnings on Friday

IAG will be the next major FTSE 100 stock to watch this week as it publishes its financial results on Friday. These results will provide more color on its performance this year and a guidance on what to expect.

The most recent results showed that IAG did well last year, with most of its growth happening in the first half. Its revenue jumped to a record high of €33.2 billion, while its operating profit soared by 13% to €5.02 billion.

The management cited the secular long-term demand in its core markets and the general constrained supply in key routes. It also experienced higher margins during the year.

IAG has moved from near collapse during the pandemic into becoming a top dividend payer. It hiked its dividend by 8.9% last year and launched a €1.5 billion share buyback plan.

IAG share price technical analysis 

IAG stock chart | Source: TradingView

The daily chart shows that the IAG stock price has come under pressure in the past few months, moving from the year-to-date high of 464p on February 27 to the current 366p.

The stock has moved to the 38.2% Fibonacci retracement level and moved below the 50-day Exponential Moving Average (EMA). Its recent attempt to rebound found substantial resistance at 413p.

Therefore, the path of the least resistance for the stock is moderately bearish, with the next key target being at 335p, the 50% Fibonacci Retracement level.