Proactive Investors - Shares in British Airways (LON:ICAG) owner IAG fell more than 3% in early trading despite reporting record third-quarter results that some analysts described as "fantastic".
The results, including operating profits rising 45% to €1.745 billion on revenue up 18%% to €8.7 billion, were ahead of consensus estimates due to revenue outperformance from higher passenger yields.
Revenue was around €0.3 billion higher than expected, said UBS, with profits beating consensus by around €175 million, helped by Iberia profits rising 76% and BA by 50%, outperforming Aer Lingus and Vueling.
Zoe Gillespie, investment manager at RBC Brewin Dolphin, said IAG’s performance has "soared beyond expectations" and noted that BA performed particularly well, with 20% revenue growth.
Bright outlook, some potential turbulence
The outlook for the fourth quarter is "positive", said Peel Hunt (LON:PEEL) analyst Alexander Paterson, with 75% of passenger revenues booked already, which bodes well for yield, which "should more than mitigate" the €150 million rise in fourth-quarter fuel cost relative as a result of the increase in spot fuel prices.
"These are fantastic results and the stock is trading at less than 5.0x P/E whilst deleveraging furthe rin a market with robust demand and constrained supply," he said, with Peel Hunt 'buy' recommendation reiterated.
Analyst Gerald Khoo at Liberum said: "We see the outlook for consensus as mixed, with Q3 outperformance balanced by fuel cost headwinds."
He noted that full-year capacity guidance was slightly downgraded to 96% of 2019 levels from 97% previously, and that IAG flagged macroeconomic and geopolitical risks with regard to Q4 bookings.
RBC's Gillespie said, "there are some clouds on the horizon, with waning consumer confidence likely to affect future bookings and fuel costs rising with the price of oil.
"That said, IAG is reasonably well hedged and bookings for the final quarter are in line with guidance – the group is going from strength to strength despite a turbulent backdrop.”
IAG shares rose over 2% above 148p in first trades, before falling to 138p after half an hour, down 3.2%, but after 9am the losses had been pared to 140.7p.