As the UK stock market begins to show signs of recovery, I hope to scoop up some promising FTSE shares at low prices. The shares I’m looking at today are International Consolidated Airlines Group (LSE:IAG), Glencore (LSE:GLEN), and easyJet (LSE:EZJ).
IAG
As the parent company of Iberia and British Airways, International Consolidated Airlines Group (trading as International Airlines Group, or IAG) has long been on my radar. Its share price hasn’t moved much in the past few years, so I’ve been waiting for the right time to buy.
Now, I think that time has come.
Yesterday (9 January), saw IAG agree on a newly expanded distribution deal with major booking technology firm Sabre. The deal increases the exposure of IAG’s fare and availability data to Sabre’s global travel marketplace. This provides customers with better access to a range of offers and discounts typically available on other airlines. I believe this will give IAG the fresh competitive edge it’s been missing.
Financially, though, IAG is struggling. After five years of declining earnings, the company is floundering in almost £15bn of debt, pushing its debt-to-equity (D/E) ratio up to 945%. It’s not a great look — but for a company as big as IAG, I think it can be overcome. In its third-quarter earnings report last year, IAG outlined strategic plans to pay off its loans, with analysts already forecasting future return on equity (ROE) to reach 30% in three years.
IAG still has a tough year ahead but it’s survived this far and I think it’ll emerge even stronger for the struggle.
Glencore
Investors have been piling into Glencore recently, despite the stock falling 16% in 2023 and a further 5% since New Year. However, the fresh injection of interest prompted analysts to predict an average increase of 14% for Glencore shares this year.
So why the sudden fuss about this major commodities and metals mining firm?
One word: decarbonisation initiatives. (Okay, that’s two words. But two words that could spell profit.)
See, renewable energy products like electric vehicles, photovoltaic (PV) cells, and wind generators require a lot of copper. As decarbonisation initiatives accelerate in 2024, copper demand is expected to skyrocket — and I imagine the Glencore share price will follow suit.
I plan to get in before it takes off.
easyJet
easyJet is another airline company that has been struggling since the pandemic, albeit one that’s vastly different to IAG. easyJet’s balance sheet looks quite strong, with a price-to-earnings (P/E) ratio of 12 times — a fair way below the UK market average of 15 times. The airline’s earnings are forecast to grow 15% per year which, while not significant, is still above the market average of 10.2%.
Analysts are predicting an average 12-month price target of around £6.20 for easyJet, a 20% increase from current levels. The most bearish among them predict a low that’s only slightly below the current price of £5.15, so the upside potential is attractive.
I’ll admit, easyJet walks a fine line with its approach to debt. At around £4bn each, its short-term assets and short-term liabilities are neck and neck. What’s more, the airline only recently returned to profitability last year, when its D/E ratio fell below 100% for the first time since mid-2020.
But as 2024 unfolds, I think easyJet’s share price will continue to grow — so long as travel remains undisrupted.
