Broker snap: IAG upgraded to 'hold'

1st Mar 2011 12:41

Charles Stanley upgrades its recommendation and target price for International Consolidated Airlines (IAG) as its market value has now factored in the rising prices of crude oil.Since the stock floated on 24 January, formed by the merger of British Airways and Iberia, €1.3bn has been wiped off the equity value.Analyst Douglas McNeil says that the price "seems to imply that oil will stay where it is for nearly four years - or maybe a bit less, since stability now would still bring another hit to profits next year as hedges roll off. All the same, that seems a fairly bearish prognosis."Additionally, 2010 results were better than the broker thought, with a pre-tax profit of €84m surpassing a forecast of €45m.The rating is raised to a 'hold' (from 'reduce'), taking into account non-fuel costs and other variables, which keep earnings per share (EPS) forecasts steady at just over 27 cents. However, with fuel costs expected to ease next year, the 2012 EPS estimate is upped to 40 cents (from 38 cents).The target price is raised to 210p, from 200p.