Brokers advise investors to buy IAG after FY results

28th Feb 2014 11:41

Liberum Capital said Iberia and British Airways owner International Consolidated Airlines Group (IAG) is on course to hit "stretching" targets.IAG on Friday said the acquisition of Spanish budget carrier Vueling, an overhaul of Iberia and improved revenue at BA had led to an annual operating profit of €770m against losses of €23m a year ago.Chief Executive Willie Walsh said: "In 2014, we expect to make steady progress towards our 2015 Group operating profit target of €1.8bn, with relatively flat unit revenue growth, and margin expansion driven by falling unit costs."Liberum has a 'buy' recommendation on IAG with a 450p target price.It said a 134% increase in operating profit in two years against a depressed but materially profitable base was "a stretching target at first glance."However, it added it believed it was achievable "even without a tailwind from better economic conditions."Keith Bowman at broker Hargreaves Lansdown said the results had sparked some profit-taking.He said IAG was dependent on an improving global economy, fuel costs could rise and rival Ryanair, which is undergoing changes to make it more customer-friendly, could give Vueling a run for its money.Bowman said: "For now, IAG is progressing. The removal of costs remains central, with labour productivity and aircraft fuel efficiency still topping the agenda. For now, and despite a testing of investor faith thanks to the stellar share price performance, [third party] analyst opinion continues to denote a strong buy."Shares fell 15p or 3.3% to 436.8p at 12:29 in London.PW