IAG closes to 3 euros with buybacks and has fuel for ‘much more’

Shares in International Consolidated Airlines Group (IAG) rose around 7 percent to €2.81 on IBEX 35 after reporting results that significantly beat analysts’ consensus estimates.

The airline group has not touched these levels since June 2020, shortly after the start of the pandemic, and is now heading straight towards the psychological resistance of 3 euros with rising results and a new share buyback program sparking investor optimism.

The company, led by Luis Gallego, made the most of its best quarter of the year thanks to seasonality, earning 9.329 million euros in this period alone, up 8 percent from 2023 and 38 percent of sales in the first nine months.

IAG’s business development is encouraging

However, the results data that most lifted investor sentiment was the 1.715 million operating profit (EBIT) for the quarter, up 15 percent.

It is the metric most used by the market because, when interest and taxes are discounted, it best shows the net evolution of a business.

“Strong EBIT results and confidence in demand could lead to improved full-year guidance,” he said. Conroy GaynorBloomberg Intelligence analyst.

In particular, this allowed IAG to sign a “very solid” quarterly report, highlighting price performance and strong performance in the Atlantic and intra-European markets, which played a key role in the airline’s recovery, analysts from Morgan Stanley.

According to these experts, IAG has opportunities to do “much more in the future”, especially given the group’s ability to deliver value to its shareholders.

As usual, the company did not provide any guidance for the rest of the year and simply said it expected “good financial performance.” However, Morgan Stanley noted that the fuel performance and earnings dynamics itself give us pause about the strength of the numbers.

Share buybacks are the most anticipated catalyst

However, experts consulted by Finance.com agreed that share buybacks were one of the key catalysts for IAG’s growth.

This is “positive” news that once again underlines the good moment that the company is going through, “with strong operational development and a very comfortable financial position,” Banco Sabadell analysts explained.

According to its own calculations, the combination of the cash dividend announced in September (0.03 euros per share) and the share buyback announced this Friday will lift shareholder returns to 3.8 percent for now.

However, experts at the Catalan company suggest an earnings estimate of 0.13 euros per share for the full year 2024, with a profit margin of 5 percent, which “may increase” after the announcement of the buyback program.

The market accepted this news very willingly, but not because of specific numbers, but because of the “rational use of excess liquidity” in the face of depressed valuations, he emphasized. Alex Irving

Bernstein analyst.

Ultimately, the buyback announced by IAG was supported by a strong balance sheet and deleveraging, factors that point to the airline group’s “good financial health,” he noted. Gerald HuLiberum analyst.

IAG, direct for 3 euros.

From a technical perspective, IAG’s outlook couldn’t be better as the shares are clearing all levels and have yet to close the continuation gap between €2.81 and €2.92, he said. Josep CodinaDirector of the analytical department of Inversión magazine.

Above these levels there is only an attack at 3 euros with the next target at 3.35 euros, Codina added.

The value has all the averages on the rise and breaks the most important levels, although it would be very interesting if there is a consolidation and the support at 2.5 euros is not lost.

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