Downgrade: Here's How Analysts See International Consolidated Airlines Group, S.A. (LON:IAG) Performing In The Near Term
Today is shaping up negative for International Consolidated Airlines Group, S.A. (LON:IAG) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analysts have soured majorly on the business.
Following the latest downgrade, the 24 analysts covering International Consolidated Airlines Group provided consensus estimates of €20b revenue in 2020, which would reflect a substantial 23% decline on its sales over the past 12 months. Statutory earnings per share are anticipated to plummet 68% to €0.28 in the same period. Prior to this update, the analysts had been forecasting revenues of €23b and earnings per share (EPS) of €0.52 in 2020. Indeed, we can see that the analysts are a lot more bearish about International Consolidated Airlines Group's prospects, administering a substantial drop in revenue estimates and slashing their EPS estimates to boot.
Check out our latest analysis for International Consolidated Airlines Group
Despite the cuts to forecast earnings, there was no real change to the €6.10 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic International Consolidated Airlines Group analyst has a price target of €8.78 per share, while the most pessimistic values it at €2.50. As you can see the range of estimates is wide, with the lowest valuation coming in at less than half the most bullish estimate, suggesting there are some strongly diverging views on how think this business will perform. With this in mind, we wouldn't rely too heavily on the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the International Consolidated Airlines Group's past performance and to peers in the same industry. We would highlight that sales are expected to reverse, with the forecast 23% revenue decline a notable change from historical growth of 3.6% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 5.9% annually for the foreseeable future. It's pretty clear that International Consolidated Airlines Group's revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. The lack of change in the price target is puzzling in light of the downgrade but, with a serious decline expected this year, we wouldn't be surprised if investors were a bit wary of International Consolidated Airlines Group.
There might be good reason for analyst bearishness towards International Consolidated Airlines Group, like its declining profit margins. For more information, you can click here to discover this and the 3 other warning signs we've identified.
You can also see our analysis of International Consolidated Airlines Group's Board and CEO remuneration and experience, and whether company insiders have been buying stock.
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