British Airways-owner International Consolidated Airlines Group SA (LSE:IAG) should get a boost from an increasingly favourable macroeconomic outlook for the aviation sector.
According to RBC, a dip in airline fuel costs should offer a roughly 2% boost to the operator’s 2024 pre-tax earnings estimates, which the bank forecasts to come in at £3.37 billion.
“We certainly see attractions in the IAG investment case,” the bank said in a note, “and now have the most potential upside to our IAG price target among ‘perform’ rated stocks.”
RBC retained IAG’s price target of 200p, alongside its ‘perform’ rating, with the figure marking a prospective 30% just on Monday’s closing price.
RBC added IAG has the cheapest price to equity ratio among airlines in its coverage, at 23.7 times and falling to 4.4 times in 2024, but also boasts the higher pre-tax earnings margin, at 5.3% and climbing to 10.8% in 2024.
“Long-haul capacity is continuing to outgrow short-haul,” RBC added, after the latter has enjoyed a faster post-pandemic recovery.