Broker snap: Credit Suisse downgrades IAG on 2013 concerns

6th Aug 2012 10:06

Credit Suisse has downgraded its recommendation for British Airways and Iberia owner International Consolidated Airlines Group, otherwise known as IAG, from 'outperform' to 'neutral' on the back of risks to 2013 consensus estimates.IAG reported a second-quarter loss of €4m last week and revealed guidance of a small operating loss for the full year. As such, the broker has cut its forecast of €143m profit to a loss of €82m and reduced its 2013 earnings before interest and tax (EBIT) estimate from €695m to €319m pre-exceptionals.The target price comes down from 176p to 160p.Credit Suisse says that it now has concerns over 2013 consensus downgrades with Reuters consensus still expecting EBIT of €612m.The broker said in a research note on Monday: "In our view, deteriorating Spanish demand puts heavy pressure on a successful Iberia restructuring. "IAG is firmly focused on restructuring both short/medium and long haul businesses and we expect ultimate success. However, this will take some time in a heavily unionised environment and it remains to be seen whether Iberia can break even before 2014 in our view, following a likely loss of over €300m in 2012 on our estimates."Credit Suisse reckons that earnings momentum will remain "soft" in the short term despite the strength in trading at British Airways.By 10:15, shares were down 0.33% at 150.5p.BC