The share price of the UK-based International Consolidated Airlines Group, S.A. (GB:IAG) declined despite the company’s promise to resume dividends in its investor event. During the event, the company outlined its “medium-term” objectives, which included dividend restarts and other growth targets. However, the company clarified that it would initiate dividend payments, which had been suspended since before the pandemic, only when it deems its balance sheet and investment plans to be “secure.”
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The mere commitment to resume dividends proved insufficient for investors, leading to a 4.6% decline in the share price on Tuesday. In 2023, the stock has shown a notable increase of more than 20%, primarily driven by improved global travel demand.
The company affirmed its optimistic financial outlook for the remainder of the year, despite considering the challenges posed by higher jet fuel costs and ongoing political uncertainties. It further outlined medium-term targets, including an expected operating margin in the range of 12-15% and a return on invested capital between 13-16%.
IAG is a group company overseeing the operations of prominent airlines in Ireland, Spain, and the UK, offering extensive support to strengthen their market positions. The predominant source of the company’s revenue is British Airways.
Analysts’ Reactions
Post-announcement, analyst Jarrod Castle from UBS maintained his Hold rating on the stock, predicting an upside of 12.27%. He stated that the targets are in line with expectations and expects that “the market’s reaction will be largely neutral.”
RBC Capital analyst Ruairi Cullinane also reiterated his Hold rating on the stock yesterday, at a price target of 200p. The price implies an upside potential of 28.3%.
The company’s shares gained some momentum last month when it published its third-quarter earnings report. The numbers were well-supported by increased summer travel demand, which led to a 39% jump in quarterly operating profits. However, analysts remain less enthusiastic, suggesting other European airlines might present more appealing investment opportunities.
What is the Prediction for IAG Stock?
IAG stock has a Moderate Buy rating on TipRanks, backed by three Buy and six Hold recommendations. The IAG share price forecast is 209.25p, which is 34% higher than the current trading level.
