British Airways owner International Consolidated Airlines Group SA (LSE:IAG) has the potential to ‘outperform’ in this third quarter whilst the major airlines benefit from strong passenger demand, that’s the view of analysts at JP Morgan.
JP Morgan’s Harry Gowers, in a note said, that across the sector he retains a constructive view despite the near-term industrial disruptions and investor concerns over the sustainability of demand.
Picking out the positives, the analyst said he sees upside to earnings – likely driven by better revenue – and at the same time the airlines will seek to prove they can execute their guidance on cost saving.
At current prices, the sector valuations do not look stretched, Gowers added, pointing to an average sector multiple of 4.5x 2024 earnings.
“On average, we sit c5% ahead of consensus, and see our estimates as well underpinned, with our yield estimates already fairly cautious for Q4,” the analyst commented.
“We place IAG on positive catalyst watch, as we see more room for potential outperformance on the second quarter result.”
Nevertheless, despite the apparent positivity, JP Morgan has a neutral rating for IAG.
JP Morgan otherwise ‘prefers’ what Gowers described as a turnaround story at Air France-KLM (OTC:AFLYY) and also what he said was a balance sheet opportunity at Lufthansa – with both European airlines rated as “overweight”.