Proactive Investors - British Airways owner International Consolidated Airlines Group (LON:ICAG) has an opportunity to beat market expectations, that’s according to analysts at JP Morgan.
The American investment bank’s own earnings forecast is already pitched some 8% above wider market consensus, following a recent ‘double upgrade’ to its view on the airline – to ‘overweight’ from ‘underweight’.
It comes as the BA-owner is reinvesting into its business, in the wake of post-COVID normalisation in the travel sector.
IAG on Friday released its financial results for the first quarter, described by JPM as “a small beat” on expectations.
First quarter revenue increased 9.2% year on year to €6.43 billion and operating profit rose to €68 million from €9 million. Passenger capacity, measured in available seat kilometres (ASK), grew by 7%, while fuel costs per ASK reduced by 4.9%, reflecting lower average fuel prices.
It saw IAG mark a small quarterly net loss, of €4 million versus €87 million this time last year.
JPM highlighted ‘earnings momentum from pricing and cost execution’, whilst it eyed growth in the coming years.
“The re-investment back into the business should then benefit longer-term earnings, with management on the call stating they expect British Airways could recoup its c€500m EBIT shortfall vs. 2019 over the next 1-2 years.
With a target price of €2.60 (c223p), JPM sees more than 20% upside to the airline’s current price in London, 184p.