I make no apologies for punning that the International Consolidated Airlines Group (LSE: IAG) share price has flown over the past year. How else could I describe recent performance?
After being grounded during the pandemic, shares in the British Airways owner belatedly took off last year, doubling in value.
They hit turbulence this year when Donald Trump unleashed his global tariff war, due to the group’s exposure to transatlantic travel. Last year, the Atlantic skies looked, well, blue-sky clear. Now they look troubled as investors wonder what Trump will threaten next.
Soaring share price
Yet the shares are up 20% in the last month, as rays of optimism filter through, and I’m thrilled because I took advantage of the recent dip. I’m already up 27% on my purchase, but I’m not looking for a quick win here. As always on the Fool, we prefer to measure success in years and decades, not weeks.
The International Consolidated Airlines Group share price is a weird thing. It’s up a bumper 85% in a year, and 153% over three years. Yet anybody who glanced at its price-to-earnings ratio would have assumed it had fallen by similar amounts, as it still trades at a cut-price valuation of around 6.8 times earnings.
I’d expect that from a stock that’s crashing, not soaring. But then air travel’s a volatile sector, as it’s prone to shocks from all sides. Bad weather – economic or meteorological – can throw the best laid plans off course. Everything from rising volatile fuel prices to wars, pandemics and natural disasters can send revenues into a tailspin.
Growth, dividends and buybacks
Some in-built caution’s natural. We don’t know what the world will throw at us next, but there’s a fair chance airlines will catch it.
In February, the group reported full-year 2024 revenue growth of 9%, driven by what it called its “market-leading network, strong brands and operational focus”.
Operating profit before exceptional items jumped 26.7% to €4.44bn, while free cash flow was an impressive €3.56bn. And that was after investing €2.8bn into the business.
International Consolidated Airlines Group still has net debt of €7.5bn, a legacy of the pandemic. The trailing dividend yield’s a modest 2.38%, but that’s forecast to rise to 2.86% this year and 3.28% in 2026. The board also plans to return up to a further €1bn of excess capital over the year, via share buybacks.
The 25 analysts lining up one-year share price forecasts produce a median target of just over 382p. If correct, that’s a solid increase of around 19.8% from today’s 319p. It would turn £10,000 into £11,980, or £12,266 including that 2.86% yield.
Forecasts aren’t exactly guarantees, but I’d be happy with that.
Of the 26 analysts giving one-year stock ratings an impressive 18 name it a Strong Buy, while just one says Sell.
Of course, all it would take is a tweet from Trump to knock International Consolidated Airlines Group off course, while a US recession or other economic nasties would inflict pain. As would a shock rise in the oil price. Yet I remain optimistic and think the stock’s well worth considering. That’s why I bought it.
