Despite being some of the most mature UK shares on the London Stock Exchange, some FTSE 100 companies still have plenty of growth to offer. That certainly seems to be the case for two such businesses when looking at the latest analyst forecasts.
Shell (LSE:SHEL) and International Consolidated Airlines (LSE:IAG) are projected to deliver some pretty robust gains over the next 12 months. And if these projections prove accurate, an equal-weighted investment into this basket of businesses could generate 23.4%.
This means a £5,000 investment today could be transformed into £6,170 by June next year. By comparison, if the FTSE 100 index generates its usual 8% return, passive index fund investors would only enjoy £5,400.
Of course, forecasts aren’t set in stone and are built on a series of assumptions that may not come to pass. So let’s dive a bit deeper into what’s driving analyst optimism and what risks investors may face.
Rebounding air travel
There’s a lot to like about IAG in 2025. Revenue and operating profits have fully recovered from their pandemic lows and have even gone on to surpass pre-pandemic records. The firm’s debt has started falling, and with management modernising its fleet to be more fuel efficient, free cash flow generation’s on the rise.
These higher profit margins have paved the way for large share repurchasing programmes, and with transatlantic travel trends still heading upwards, investor sentiment has increased significantly. Analysts at JPMorgan and Deutsche Bank have both upgraded their forecasts and issued Buy recommendations.
Needless to say, superior financials in a period of rising demand are an excellent sign for investors. However, even bullish analysts have highlighted potential threats. Geopolitical events may indirectly impact operations, most notably through oil prices that could potentially send fuel costs surging.
The downward trend in oil & gas prices over the last 12 months has been a bit of a boon since it lowers IAG’s fuel costs. But should that trend decide to reverse, margin pressure could once again emerge if the company’s unable to pass the cost onto customers.
Offsetting with energy
A return to higher oil & gas prices would definitely be welcomed by Shell, creating a bit of a diversification benefit to this basket. Despite the recent weakness in fossil fuels, the energy titan has performed better than what most analysts initially expected. And when paired with its planned expansion of liquefied natural gas production along with cost-cutting initiatives, analyst sentiment’s also improving for Shell.
However, it’s important to note the firm’s facing increasing pressure from activist investors regarding its slow transition to renewables. In the 2024 annual general meeting, almost 21% of shareholders voted against its updated climate strategy, surpassing the group’s mandated threshold to further consult with shareholders and potentially reconsider.
A failure to address activist investor concerns in future annual meetings could impede management’s strategy or, in the worst-case scenario, trigger a change of leadership. In either scenario, Shell’s share price performance could fall short of expectations.
Nevertheless, both of these businesses appear to offer promising potential right now. Therefore, investors looking for UK shares to buy may want to consider exploring these opportunities further.
