UBS ups IAG to 'buy', says share price pressure overdone

29th Apr 2019 08:07

(Sharecast News) - UBS bumped up its rating on shares of British Airways and Iberia parent International Consolidated Airlines Group to 'buy' from 'neutral' on Monday as it argued that share price pressure is now overdone.The stock is trading close to trough multiples, meaning the probability of it de-rating further is low, UBS said.In addition, it said the summer demand environment should be supported by less geopolitical uncertainty in the UK, while an improved trend on North Atlantic pricing in the second quarter and European capacity discipline over the summer gives the bank confidence in its positive full year pricing of +2% versus market implied of -2%.UBS also highlighted potential for further industry consolidation that would aid the industry outlook and noted a material dividend payable on 8 July.The bank cut its 2019/20 earnings per share estimates by 9% due to changes in currency, yield outlook, fuel price and the IFRS 16 impact."While we now see 2019 estimated EBIT below 2018 levels we think our forecasts are conservative and if IAG sees a strong summer season that estimates will see upside risk."Indeed if the 2019 estimated EBIT is below 2018 this would be the first year since IAG's formation where profits are down year-over-year. We think UBS estimates are below consensus given that the market still needs to adjust for IFRS16 and recent oil price change."UBS has a 705p price target on the stock.At 1300 BST, the shares were up 1.3% at 542.20p.