Broker snap: Jefferies sees IAG trading at 15 per cent premium

25th Nov 2013 08:52

In a research note released on Monday morning analysts at Jefferies have heaped praise on the recent operational performance of International Airlines Group (IAG), highlighting the fact that the group has shown "meaningful, simultaneous, progress at BA, Iberia and Vueling".Iberia is the firm's Spanish unit while Vueling is its low-cost Spanish carrier. Likewise, an improvement was seen in all regions "reflecting IAG's strong markets position on key routes", wrote analysts Mark Irvine-Fortescue, Ian Rennardson and James Wheatcroft.As a result, and following updated guidance from the company and the increased detail provided at the Investors' Day, Jefferies has raised its target for operating profits in 2015 to €1.6bn.These analysts also commented: "The IAG portfolio increasingly looks like a strong platform for growth as the airline industry consolidates and self-help initiatives gain traction."Jefferies added that "the shares could pause for breath", given that no update is scheduled until the final results at end of February next year.Nevertheless, and when it comes to possible future catalysts, it lists several including: management's intention to pay a dividend; further progress on restructuring the short-haul businesses; and the fact that the company's guidance does not assume any improvement in macro conditions although the business being geared into the economic cycle. Jefferies already had IAG rated as a 'buy' and on Monday raised its price target to 410p. The latter is premised on the price of the stock attaining a 15% premium to the sector average (currently an 8% discount).AB