International Consolidated Airlines Group (LSE:IAG) shares were among the top-performing FTSE 100 stocks in August. The IAG share price jumped almost 11% during this period, with some big news helping to propel the stock higher. Here’s the lowdown on what happened and what I think will happen next.
Strong results
The main driver behind the stock last month was the release of the H1 results. They detailed further progress for the airline operator, including the resumption of paying dividends.
It recorded an operating profit of €1.3bn, and although this was only €49m above the same figure last year, it’s important to remember that H1 2023 was a record result as the pandemic blues were firmly washed away. So to be able to beat that lofty benchmark is impressive.
It was also able to reduce net debt from €9.2bn this time last year to €6.4bn now. This is a large improvement and means that debt is at a much more manageable level going forward. The cost of paying debt interest will be lower, helping to free up cash for other business purposes.
Finally, income investors cheered due to the resumption of a three cent dividend per share. Granted, the dividend yield of 1.38% isn’t crazy, but it shows the intention of the management team to want to start paying out cash again.
Looking ahead
September brings a new month, with events that can influence the share price. For example, I’m watching out for the Bank of England meeting (19 September) where there’s a chance interest rates could fall again. Even if they don’t, I expect the committee to comment that further cuts are coming. This should act to push up the shares further, as it’ll make debt cheaper to service.
As for the stock specifically, it’s now at 181p. The 52-week highs are just a little higher at 187p. If it broke above that number, it would put the stock at the highest level since the summer of 2021.
However, there are risks going forward. I was disappointed to see the business pull out of fully buying Air Europa. It’s not just about the €50m break fee it’ll pay. Rather, I don’t see how it could have flipped from wanting to buy to not wanting to buy in a relatively short space of time. The management team needs to be clear on what it wants to pursue to avoid dropping the ball on future occasions.
Continued momentum
I’ve been sceptical about IAG in the past, with all of the hangover from the pandemic. Yet the August performance has really made me think. I’m now seriously thinking about buying the stock based on the momentum behind the recent financial results.
