Broker snap: UBS sees more upside at IAG

13th May 2013 09:34

UBS has hiked its target price for airline group IAG from 285p to 310p and kept its 'buy' rating for the stock, saying that the risk to consensus estimates continues to be on the upside.First-quarter results from IAG released last week were broadly in line with the broker's expectations excluding an exceptional charge relating to the restructuring of the Spanish division, Iberia.Non-fuel costs per available seat kilometre, a key measure in the airline industry, were up 6.0% in the first quarter mainly due to employees, but UBS expects these to be lower for the full year due to benefits from the Iberia restructuring and a move into profitability by the BMI unit.The broker reckons that forecasts do not yet reflect the acquisition of an additional 44.66% stake in Vueling (now 90.51% owned) last month. While IAG is not able to provide operating profit forecasts as it seeks shareholder approval for the British Airways fleet deal, UBS has raised its diluted earnings per share (EPS) estimate for 2013 by 2.5%. "We don't incorporate Vueling into forecasts as we await further guidance at the June investor's day and first-half results. However, Vueling in our view could be c3.0% EPS accretive in 2013e and c4.0% in 2014."Despite the upbeat comments, the stock was down 2.97% at 267.7p by 09:54 on Monday.BC