Things looking up for IAG next year, Credit Suisse says

14th Sep 2015 12:06

(ShareCast News) - Things were looking up for up for IAG shares in 2016 given improved pricing on its Transatlantic routes, the pricing behaviour within the sector in general and the stock's then current valuation, analysts at Credit Suisse said on Monday.The company's pricing in the third quarter "inspires confidence", making underlying growth of 49% in earnings before interest and taxes in the second half of 2015 "likely", analyst Neil Glynn said in a research note sent to clients.Credit Suisse estimated the company's revenues would expand by 38% in 2016 if Aer Lingus was included and by 31% if not."Skepticism remains around industry structural progress, but our analysis of UK-US pricing suggests that competition has remained returns focused, despite a disappointing 2Q hiccup," Glynm added.Underpinning his argument, IAG's valuation relative to that of the top ten global airlines illustrated a 20% re-rating potential, suggesting the stock should trade at a lease-adjusted EV/IC ratio of 1.8 or six times EV/EBITDAR.On the back of the above the Swiss broker upped its target price on IAG stock by 14% to 852p from 750p while reiterating its 'outperform' recommendation.