International Consolidated Airlines Group (LSE: IAG) shares are flying. They’re up 55% in 12 months and 195% in two years. Investors who hopped on before take-off have made outrageous sums, though even those of us who boarded later have done nicely. Can it maintain this kind of excitement?
The airline group behind British Airways, Iberia, Aer Lingus, and Vueling was on the brink of bankruptcy five years ago as Covid grounded fleets worldwide. Survival came through a mix of rights issues, emergency loans, and a heavy dose of state support. Net debt peaked at around €11bn, but the group has since reduced it to roughly €6bn, giving it more financial breathing space.
Flying FTSE 100 stock
Investors like me dream of jumping on recovery stocks like this one, but initially I missed my flight. Last year the shares doubled, while I sat on the sidelines kicking myself, while hoping I’d get a second chance. Happily, I did.
Airline shares tend to be cyclical. They thrive when economies are strong and cash is plentiful. Wars, recessions, and other shocks can hammer demand.
So they took a major hit when Donald Trump announced his ‘liberation day’ tariffs on 2 April. I saw this as my opportunity to make good my earlier omission, and buy in.
I placed my order as soon as Trump announced his 90-day tariff pause. The shares had already jumped nearly 10% by the time my trade executed, yet I’m still up more than 50% since. I don’t try to time markets, but this one proved an open goal.
Growth has slowed in recent weeks and Q3 results on 7 November disappointed, with operating profit weaker than expected due to softness in North America. Analysts remain upbeat though, with JPMorgan maintaining an overweight rating and pointing to a $1.5bn share buyback planned for February 2025.
Dividends, share buybacks, and growth
One thing about International Consolidated Airlines Group really surprises me. Even after the initial post-Covid recovery, its price-to-earnings ratio stood at just three or four. It’s still modest despite the recent surge, at just over eight. That’s well below the FTSE 100 average of around 18. This suggests there’s still a buy opportunity here. However, I’d also treat that low P/E with caution. I suspect investors may always want a cushion here.
The dividend has been restored and the trailing dividend yield is now 1.94%. That’s forecast to rise to 2.45% in 2025 and 2.66% in 2026. The board is exploring acquisitions, including a minority stake in Portugal’s flag carrier TAP, signalling confidence in future growth. Consensus analyst forecasts point to a median target of 463p, implying a 17% rise from current levels and around 20% total return including dividends.
This suggests the real excitement has passed. I don’t think investors are going to make outrageous sums today. And if the US does slip into recession, that will hit the transatlantic trade. Europe isn’t exactly booming either. But with growth, dividends, and buybacks on offer, I think IAG is still well worth considering with a long-term view.
