Jefferies hails 'encouraging' progress at IAG

11th Mar 2014 10:25

Jefferies has hiked its target price for airline group IAG and retained its 'buy' rating, saying that the company 'continues to make encouraging, simultaneous progress' at British Airways, Iberia and Vueling.The broker said that the long-term equity story at IAG remains "attractive" with the business likely to benefit from a global macro recovery and from further industry consolidation.Jefferies hailed IAG's 2013 results released last month which showed that operating profit totalled €770m, compared with a loss of €23m the year before. This was as a result of "three-pronged progress" with the firm's main divisions all making positive contributions, the broker said."The in-line 2013 outcome, together with progress on Iberia labour negotiations, gives us the confidence to lift our (previously low-end) 2014/2015 forecasts," Jefferies said.The target price for the stock has been raised from 410p to 510p, which is based on IAG trading on a 10% premium to the sector average, "justified by broad-based, ongoing restructuring progress". The stock currently trades in line with the average, Jefferies said."Consensus is not discounting any material risk to [estimated] 2015 targets. Indeed, attention is turning to the next potential upgrade."The broker said the most obvious source of a potential upgrade is Iberia labour developments, "but gauging the timing and quantum is difficult and we expect to wait for the second half for better clarity - as with the dividend". IAG was trading 1.1% higher at 437.8p by 10:24 on Tuesday.BC