Worldwide Consolidated Airways (LSE:IAG) has reported what analysts have referred to as “blockbuster” full-year outcomes — but its share value is firmly within the crimson proper now. At 431.4p per share, the British Airways proprietor has slumped 6% on Friday (27 February).
Is that this day by day drop merely right down to buyers taking earnings after latest share value power? Probably. Or is one thing extra sinister happening? Let’s have a look.
Picture supply: Worldwide Airline Group
Document numbers
Regardless of strain on shoppers in lots of markets, the broader journey sector continued to defy gravity final yr. IAG’s sensible outcomes announcement as we speak serves as a helpful barometer for the resilience of the airline business.
Revenues on the FTSE 100 agency rose 3.5% between January and December to €31.2bn. It was boosted by robust demand for its premium providers, which helped offset some weak point in its economic system choices.
Working margin elevated 130 foundation factors, to 13.1%, helped by an 11% drop in gasoline prices. Working revenue surged 17.3% from 2024 ranges, to a document €5bn.
This efficiency additionally heralded a robust enchancment in IAG’s stability sheet. Free money circulation dropped €500m yr on yr, however was nonetheless appreciable at €3.1bn. This helped the corporate trim web debt to €5.9bn as of December, down from €7.5bn a yr earlier.
In consequence, IAG introduced plans to purchase again €1.5bn value of its shares in 2026. It lifted the entire dividend for final yr by 8.9%, to €0.098 euro cents per share.
Brilliant outlook
The query is, can the group proceed to thrive? The corporate itself is assured, predicting “revenue development and earnings development at excessive margins” and “important free money circulation resulting in a stronger stability sheet.” But as I say, IAG’s share value has dropped following as we speak’s announcement.
It’s truthful to say profit-taking could also be accountable to some extent. However that’s not the entire story, with as we speak’s launch additionally revealing that cracks are beginning to seem. Gross sales development slowed to low double-digits final yr, and in This autumn the highest line truly contracted 0.8% yr on yr as cargo and passenger revenues each dropped.
With financial uncertainty rising, and a cost-of-living disaster enduring in key markets, it’s potential IAG might wrestle to duplicate final yr’s robust outcomes. Nevertheless, that’s not the one important hazard it faces, with surging oil costs threatening to drive up gasoline prices as stress between the US and Iran will increase.
Demand on key transatlantic routes might additionally slip because the US tightens border controls, and the present political local weather damages America’s picture overseas.
Are IAG shares a possible purchase?
With its robust model energy, IAG’s properly positioned to navigate a broader sector downturn. The supply of latest plane with greater premium capability might additionally assist it . However it’s not completely proof against weakening market circumstances, as these This autumn numbers present.
So ought to buyers think about shopping for IAG shares as we speak? Probably, however I’m not shopping for them for my very own portfolio. I’ve discovered different much less dangerous shares to purchase proper now.
