Since I last wrote about British Airways owner IAG (LSE: IAG), the share price has seen an 11% recovery. After a generally positive set of H1 results, I could be tempted into buying the shares in order to capitalise on the potential upside.

IAG shows promise

IAG followed through on its Q1 guidance of achieving profitability in the second quarter. Q2 was, in fact, the group’s first profitable quarter since the start of the pandemic, with an adjusted earnings per share (EPS) of 2.5c.

It was also pleasing to see revenue per available seat kilometres (ASK) and passenger numbers edge closer to pre-pandemic levels. Aside from that, IAG managed to improve its financial position slightly, reducing its debt by €688m, while receiving positive free cash flow.

Therefore, the view of achieving operating profitability by the end of the year is starting to become a realistic possibility. All signs are pointing towards an increasingly promising rest of the year for the FTSE 100 firm.

Striking deals

Apart from the much improved financial performance of the company, IAG also managed to quash fears of future strikes. The company managed to strike a deal with 16,000 workers for a 13% pay rise this year. This should alleviate fears of last-minute flight cancellations, at least for the time being.

Nonetheless, not all is as smooth cruising as it may seem. This is because Heathrow Airport has opted to extend its cap on passenger numbers until the end of October, with no more than 100,000 travellers per day, leading to cancellations of tens of thousands of flights. As Heathrow is the hub of IAG’s most profitable airline, I’m expecting this to impact H2 results.

As a result, CEO Luis Gallego revised the company’s outlook downwards. IAG now expects capacity to hit 78% of 2019 levels, as compared to the previous 80% that IAG had expected. From this, North Atlantic capacity (IAG’s most profitable routes) is now expected to hit 92% of 2019 levels in Q3, compared to the previous guidance of 95%.

Having reservations

While the future outlook for IAG still remains rather promising, I have my reservations regarding its potential upside. Although passenger demand still remains strong, I’m fearful that it’s only a matter of time before sky-high inflation, and a potential recession on the cards, starts hitting consumers harder.

Furthermore, IAG’s long-haul recovery continues to lag that of shorter trips. The continued travel restrictions in large parts of Asia, specifically China, is hindering its growth potential. And with China sticking to its zero-Covid policy, this avenue doesn’t look likely to recover any time soon. Business travel also still continues to lag, only hitting 60% of its pre-pandemic volume. Moreover, as the winter months approach, I’m expecting the number of holiday travellers to start winding down.

Even though IAG shares have the potential to grow plenty, my optimism is hindered by a cloudy economic environment. Overall costs still remain high and, most importantly, the company still has a mountain of debt to pay off, which is expected to increase going into the year end. For that reason, I won’t be investing in IAG shares.

The post Should I be buying IAG shares today? appeared first on The Motley Fool UK.

More reading

• Are IAG shares the ultimate FTSE 100 volatility play? 
• Up 55% and a P/E of 6.6, is this FTSE 100 share too cheap to miss?
• IAG share price vs budget rivals: which airline share looks better value in 2026?
• The red lights are flashing for this FTSE 100 share! Will it crash?
• After tanking 20% in March, is this a bargain-basement value stock?

John Choong has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The decline won’t seem to stop for IAG (LSE: IAG) shares. With the share price sliding to a one-year low, I might be tempted to see it as a buying opportunity. Nonetheless, given the state of its finances, I know it would be a high-risk, high-reward investment.

Terminal situation

IAG shares aren’t just trading at its one-year low. It’s also close to its five-year low of £0.91. What started off as a baggage system error last month has now evolved into something much worse. This is because staff shortages at airports have led to massive travel disruptions for British Airways, the biggest airline at IAG.

The airline had initially cancelled 650 flights in July, impacting over a 100,000 passengers. But to make matters worse, Britain’s biggest airline said today that another 10,3000 short-haul flights will be axed until the end of October. This is in part due to British Airways staff striking during the busiest period for the airline. Most of its check-in staff had received a 10% pay cut during the pandemic, but are yet to get their compensation fully reinstated.

This isn’t good news for IAG as it gets squeezed from both sides. Mass flight cancellations could result in the group falling short of its top line guidance. On the other hand, bigger paycheques to check-in staff will squeeze its bottom line even further.

The easy way out?

Sky-high inflation is starting take a toll on consumers’ wallets. Additionally, the Bank of England expects inflation to peak at 11% later this year. As such, consumers’ discretionary spending is expected to decline. Given that fares from airlines at IAG don’t exactly scream bargain, customers are more likely to turn towards budget airlines such as easyJet and Wizz Air. While its competitors also face a similar number of cancellations, they offer cheaper fares on average. This brings better value proposition to customers.

Delays expected for IAG

When IAG unveiled its Q1 results, it mentioned its aspirations to achieve operating profitability by Q2. However, given the current state of affairs, I view this to be highly unlikely. And even if it does manage to achieve such a feat, I don’t expect it to last for the rest of the year. Therefore, I anticipate delays on its route back to profitability.

More worryingly though, IAG has a mountain of debt (€19.6bn) to deal with. It doesn’t help either when its debt isn’t covered by its current operating cash flow nor its cash and equivalents (€7.9bn). If the FTSE 100 firm can’t deliver on its repayments, it’ll have to risk refinancing its debt, making repayments more expensive. This will likely sour investor sentiment further.

IAG shares are a in precarious position at the moment. There doesn’t seem to be light at the end of the tunnel and its balance sheet is in tatters. Moreover, its share price seems to be only going in one direction for the time being. Nevertheless, a report from Bloomberg stated that British Airways is nearing a deal with unions, which could mitigate staffing shortages and turn the airline’s fortunes around. That being said, I still won’t be buying IAG shares for my portfolio as I view it as too high of a risk. Instead, I’ll be investing in other companies that have better fundamentals.

The post Should I buy IAG shares if the price drops below £1? appeared first on The Motley Fool UK.

More reading

• Are IAG shares the ultimate FTSE 100 volatility play? 
• Up 55% and a P/E of 6.6, is this FTSE 100 share too cheap to miss?
• IAG share price vs budget rivals: which airline share looks better value in 2026?
• The red lights are flashing for this FTSE 100 share! Will it crash?
• After tanking 20% in March, is this a bargain-basement value stock?

John Choong has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

International Consolidated Airlines Group (LSE: IAG) shares are currently trading at £1.15, and are down 25% this year. Given the current economic landscape, its stock could be in further trouble, and here’s why.

Excess baggage

From Covid, to inflation, and now airport disruptions, the travel industry can’t seem to catch a break, and this week has been one of the more disruptive ones. Staff shortages, technical difficulties, and rail strikes have served up a perfect dish of chaos for IAG.

On Monday, Heathrow Airport suffered a widespread problem with its baggage system. As a result, Heathrow requested airlines to cancel 10% of their flights from Terminals 2 and 3. Although IAG’s main hub is located at Terminal 5, this still affected the limited number of IAG services at T2 and T3.

To make matters worse, Gatwick Airport capped its daily operations to 825 flights a day in July, and 850 flights a day in August, due to staff shortages. This has led to delays and flight cancellations, with easyJet suffering the brunt of it. Nevertheless, I doubt IAG is spared from this as I’m expecting a number of its services to be impacted as well.

Three strikes and you’re out

Three weeks ago, British Airways check-in staff threatened to strike in July. This is because their pay has yet to return to pre-pandemic levels after salary cuts made during the pandemic. With the deadline fast approaching on 27 June, IAG is stuck between a rock and a hard place.

For one, the board could reinstate workers’ pay, but doing so would impact its already fine margins. To mitigate this, British Airways would have to increase its ticket prices, which might dampen demand and extend its route back to profitability.

On the other hand, not doing anything could be equally devastating. A lack of check-in staff might lead to further delays and cancellations, which wouldn’t be good for IAG shares. Seeing that British Airways is the group’s biggest revenue driver, a strike could impact IAG’s top line quite substantially.

Delayed departure

In its last trading update, IAG mentioned that it expects to achieve operating profitability by Q2. However, this seems to be increasingly unlikely. Apart from potentially having to fork out higher wages or lose millions in revenue, the FTSE 100 firm still has to deal with high oil prices.

Since its Q1 update, jet fuel prices have hit fresh new highs of $175 per barrel, which isn’t going to do its bottom line any favours. Additionally, the Consumer Price Index in May continued to hit 40-year highs at 9.1%. With fears of an impending recession, this is most likely going to dissipate the travel tailwind and send IAG shares even lower.

More importantly, IAG’s balance sheet is in a terrible state. Its debt-to-equity ratio sits at a staggering 2,318%, while its short-term assets can’t cover its short-term liabilities. Not to mention, its last reported free cash flow sits at -€885m. This rings alarm bells of a company that’s in big trouble. Therefore, I won’t be investing in IAG shares. Instead, I’ll be parking my money in other growth stocks that have better financials.

The post Could IAG shares be in further trouble? appeared first on The Motley Fool UK.

More reading

• Are IAG shares the ultimate FTSE 100 volatility play? 
• Up 55% and a P/E of 6.6, is this FTSE 100 share too cheap to miss?
• IAG share price vs budget rivals: which airline share looks better value in 2026?
• The red lights are flashing for this FTSE 100 share! Will it crash?
• After tanking 20% in March, is this a bargain-basement value stock?

John Choong has no position in any of the shares mentioned at the time of writing. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Higher altitude expected

So, why is the IAG share price down then? The group reported an operating loss of €731m. This was much better than the €1.1bn loss it incurred a year ago after all. While this is a 32% improvement, the figure still fell below analysts’ expectations of €548m. Additionally, total passengers also fell below expectations of 15.3m. The group reported a figure of 14.4m instead. Finally, worries of staff absenteeism and IAG having to fork out additional capital to hire workers soured investor sentiment. Therefore, the share price dipped from expectations not being met.

Transit-ory

Pushing the negatives aside, there were lots of positives to takeaway. IAG is in a transitory period as it gears up towards profitability, and the numbers don’t lie. For one, total revenue before exceptional items was up by a whopping 485% year on year (Y/Y). This beat analysts’ expectations of €3.37bn as the final figure was €3.43bn.

Load factor, a measure of how full a plane is, also saw a monumental increase. The metric jumped to 72%, which was also above consensus of 69%. Nonetheless, this was still 41% down from pre-pandemic levels, as travel to Asia continues to be hampered from Covid restrictions.

Even though the conglomerate’s balance sheet still remains undesirable, it’s worth noting that IAG reduced its debt levels by 0.6%. On top of that, it also improved its liquidity position. Cash and equivalents came in at €8.2bn, a €241m improvement from last quarter.

Sky-high inflation

The main surprise for me was the guidance provided in the trading statement. I was amazed to see that IAG expects its operating results to be profitable from Q2 onwards. In light of the recent guidance provided by many of its other competitors, this could be possible. As such, the airline group may very well be in for a windfall of profits in the short term.

Nevertheless, I am still cautious about the optimistic IAG guidance. This is because, despite industry tailwinds of travel recovering, consumers continue to face a cost of living crisis, with the worst yet to come. The Bank of England recently raised its bank rate to 1% and predicts a contraction in the British economy towards the tail end of the year. Given that the majority of the firm’s customers fly on British Airways, a contraction could lead to a substantial hit to IAG’s customer base.

To conclude, although IAG remains upbeat about its prospects in achieving profitability for the year, I think the path ahead is a cloudy one. I believe inflation will eat into discretionary spending eventually. It’s only a matter of time before the travel industry has to hit the brakes once again. With that being said, I don’t think the IAG share price will recover to its highs of £4.50.

The post Can the IAG share price recover from its slump? appeared first on The Motley Fool UK.

More reading

• Are IAG shares the ultimate FTSE 100 volatility play? 
• Up 55% and a P/E of 6.6, is this FTSE 100 share too cheap to miss?
• IAG share price vs budget rivals: which airline share looks better value in 2026?
• The red lights are flashing for this FTSE 100 share! Will it crash?
• After tanking 20% in March, is this a bargain-basement value stock?

John Choong has no position in any of the shares mentioned at the time of writing. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The airlines have been hit particularly hard, with British Airways owner IAG down more than 16%, at time of writing. Ryanair is down 10% and easyJet down by 13%. Aircraft engine maker Rolls-Royce has fallen 5.5%, as fears grow over international travel.

FTSE 100 energy giants BP and Shell are also down around 5% or 6%, as any Covid resurgence could hit demand for oil.

Who’s afraid of a stock market crash?

Judging by the sectors hit today, it’s beginning to feel a lot like March 2020. As well as FTSE 100 travel and energy stocks, entertainment enterprises are in the mire. Cineworld, Mitchells & Butlers and Restaurant Group are firmly out of favour. Online grocery delivery specialist Ocado Group is bucking the trend by climbing.

As Hargreaves Lansdown markets analyst Susannah Streeter has noted, scientists are calling the mutations “horrific” and of “great concern”. Their dire warnings have triggered a sell off in Asia, where Japan’s Nikkei and Hong Kong’s Hang Seng both fell by 2.6%, while in Europe, the DAX, CAC 40, and Euro STOXX 100 are all tumbling.

I have cautiously backed both BP and Shell in recent days, but lacked the courage to buy airline stocks which look too exposed to pandemic uncertainties. That is one reason why I am relatively sanguine about today’s events (at least from an investment perspective). It’s not the most important one, though. As ever in the middle of a stock market crash, the idea of selling any of my shares or funds simply doesn’t occur to me.

I’ll buy FTSE shares once they get cheaper

I’m still more than a dozen years away from retirement, and that gives my portfolio plenty of time to recover from the current setback. With luck, today’s Covid fears will have been overdone. Even if they’re not, it’s impossible to assess the impact on stock markets. There are just too many variables, including how central bankers will respond.

If the stock market crash does lead to a more protracted slump, further stimulus could be forthcoming, bolstering shares. Investors have been quietly making that bet for years. The US Federal Reserve has effectively been backstopping share prices since the financial crisis.

My wider point is that nobody knows where stock markets will go next. They could crash further. If they do, I still won’t sell. Instead, I would take the opportunity to pick up my favourite FTSE stocks or funds at a reduced price.

History shows that stock markets always recover after a crash, if you give them long enough. In my opinion, they remain the best way to generate long-term dividend income and capital growth for my retirement. Today’s grim news won’t change that.

The post Stock market crash: I’m still buying FTSE shares despite ‘horrific’ new Covid warnings appeared first on The Motley Fool UK.

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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Ocado Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Competitors’ results

Industry giant United Airlines announced its 2021 Q1 results on Monday. These were unsatisfactory to say the least, with a net loss of $1.4bn. Operating revenue was also down by 66% compared to 2019, falling to $3.2bn. CEO Scott Kirby explained the pandemic had decreased demand by 80% for United Airlines, which was the primary source of its losses.

This disappointing report seems to have impacted the recent rally of airline share prices, highlighting the profitability problems most firms are still dealing with. Delta Airlines also fell 5% and American Airlines tanked 7% in reaction to the news.

IAG had already shared some disappointing news in late February in its Q4 results. Total revenue was down 69% while gross debt rose from €14.3bn to €15.7bn year-on-year. In addition to this, the total number of passengers carried was down 84%, which highlights the pandemic’s inescapable impact. This was felt most heavily through IAG’s Aer Lingus airline. But it wasn’t all bad news.

A more positive future outlook for the IAG share price?

Due to a massive reduction in flight numbers, IAG was able to trim a healthy 44% of operating costs. This has helped the firm build a stronger liquidity position than before the pandemic. This is great for it going forward as due to debts increasing, it’s essential to be able to counteract these with a stable cash flow position.

The firm also highlighted the positive response to the UK government’s roadmap for exiting pandemic restrictions. IAG’s British Airways saw bookings flourish in the immediate aftermath of the news. The firm won’t operate at full capacity any time in the near future, but the travel sector is likely to boom in the next year and beyond. People have been stuck in their homes and want to travel freely again. This is likely to benefit the IAG share price for years to come.

The IAG price-to-sales (P/S) ratio is 0.98. For comparison, competitors Delta Airlines and Southwest Airlines have P/S ratios of 2.2 and 3.91 respectively. A lower P/S ratio tends to indicate that a stock may be undervalued in comparison to its competitors. This metric points me towards buying the stock at the current share price.

My Verdict

It’s clear the airline industry has faced some turbulence. I believe the United Airlines results scared airline investors into dumping some of their shares in the wider sector. The results also highlighted that firms are still struggling and will continue to struggle with the impacts of the pandemic, even though normality may seem close. However, I would use this opportunity to grab some cheap shares for my portfolio, as I’m bullish about the travel industry’s long-term future.

The post The IAG share price fell 8% yesterday. Here’s why appeared first on The Motley Fool UK.

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Dylan Hood owns shares in Southwest Airlines. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Profits climb skywards

Despite what you might have heard, the market isn’t efficient, and there are always stocks available at bargain prices, if you know where to look that is. Certainly, many stocks on lowly valuations are cheap for a reason, perhaps due to cyclicality, high levels of debt, or simply deteriorating fundamentals.

Nevertheless, previously-popular sectors can often be shunned by the market for no apparent reason with some companies genuinely mis-priced.

British Airways owner International Consolidated Airlines Group (LSE: IAG) may be trading on a bargain valuation, but by no means does that reflect the company’s recent performance. The FTSE 100 group which also owns Spanish airlines Iberia and Vueling, as well as Irish flag carrier Aer Lingus, has seen profits climb skywards over the past few years, overturning a €774m pre-tax loss in 2012, and gradually building up to profits of €2.4bn reported in its last set of full-year results.

Incredible value

The company’s latest trading update revealed yet another strong quarter with operating profit up 20.7% to €1,455m (before exceptional items), with all the group’s airlines performing well. Passenger unit revenue was up 2.2% at constant currency, boosted by improvements in the Spanish and Latin American markets.

The group’s commercial operations performed well despite underlying disruption from severe weather and terrorism, with the cargo business improving during the quarter due to stronger Asia Pacific demand compared to the previous year. Management is anticipating further improvements in the numbers for the calendar year just ended, with operating profits (before exceptional items) forecast to rise to €3bn.

International Consolidated Airlines has continued to shrug off external factors and improve its bottom line year-on-year, and this in turn has helped propel the share price recently to its highest level this century. Nevertheless, I think the shares still offer incredible value at just seven times forward earnings for 2018, with a growing dividend that supports a solid yield of almost 4%.

Buoyant market

Another company that I believe is offering great value right now is leading UK housebuilder Redrow (LSE: RDW). Shares in the Flintshire-based group are up by an impressive 29% since my original recommendation in March 2017, but I believe shareholders should hold on for further gains.

In a statement released at its Annual General Meeting (AGM) the FTSE 250 group said that the market had remained buoyant despite a recent slowdown in sales due to ongoing political and economic uncertainty. Furthermore, management doesn’t expect the recent interest rate increase to have any adverse impact on the market as mortgage rates remain very competitive by historical standards.

The group’s total order book is currently at a record high of £1.2bn further underpinning my belief that the UK’s shortage of affordable housing will continue to support demand. With a forward price/earnings ratio of just eight, I believe Redrow’s shares are priced for further long-term growth.

The post 2 stocks that look absurdly cheap right now appeared first on The Motley Fool UK.

More reading

• Are IAG shares the ultimate FTSE 100 volatility play? 
• Up 55% and a P/E of 6.6, is this FTSE 100 share too cheap to miss?
• IAG share price vs budget rivals: which airline share looks better value in 2026?
• The red lights are flashing for this FTSE 100 share! Will it crash?
• After tanking 20% in March, is this a bargain-basement value stock?

Bilaal Mohamed has no position in any shares mentioned. The Motley Fool UK has recommended Redrow. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More traffic

Only last week, the group which also owns airlines Iberia and Vueling, as well as Irish flag carrier Aer Lingus posted some very encouraging traffic statistics for the month of June. Group traffic as measured in revenue passenger kilometres, increased by 3.9% to 22,878, compared to 22,021 a year ago, with overall capacity measured in available seat kilometres rising by 3.5% to 27,127.

Meanwhile, the passenger load factor, which measures how full flights are, edged higher from 84% to 84.3% for the month of June, helping to raise the overall load factor from 80% to 80.9% for the first half of the year. The total number of passengers carried last month climbed to 9,752, a 3.2% improvement from 2016, bringing the total number of passengers to 48,806 so far in 2017, 4.6% higher than the same period a year ago.

Brexit

The airline industry and the travel industry as a whole have been facing challenging times of late, with political and economic uncertainty, Brexit, and the subsequent volatility in the currency markets weighing heavily on many London-listed carriers. But International Consolidated Airlines has responded well, with cost-cutting and structural changes helping the group to increase profitability despite the recent challenges facing the industry.

This outperformance hasn’t gone unnoticed by the market, with the share price being propelled to 637.5p – the highest since 1998. But I believe the shares still offer good value for bargain hunters, with the P/E ratio at a lowly 7.4 for the current year to December, and falling to just 6.9 for 2018.

Housing shortage

Meanwhile, another London-listed firm easily outperforming the market over the past year is Redrow (LSE: RDW). The Flintshire-based housebuilder has seen its share price rise by no less than 80% over the past year and surpass the previous all-time high of 548p over a decade ago.

The FTSE 250-listed developer may be trading at record highs, but in my view the share price still has further to go. Don’t get me wrong, I’m not denying that recent political and economic turmoil brought about by Brexit will weigh heavily on the minds of potential investors. But I believe the continuing housing shortage will mean that housebuilders such as Redrow will see a steady increase in demand over the coming years, albeit at a slower pace.

And with analysts’ consensus estimates suggesting an 8% increase in underlying earnings over the next couple of years, I believe the firm still offers excellent value trading at a very appealing multiple of just eight times forecast earnings.

The post 2 great value stocks for successful investors appeared first on The Motley Fool UK.

More reading

• Are IAG shares the ultimate FTSE 100 volatility play? 
• Up 55% and a P/E of 6.6, is this FTSE 100 share too cheap to miss?
• IAG share price vs budget rivals: which airline share looks better value in 2026?
• The red lights are flashing for this FTSE 100 share! Will it crash?
• After tanking 20% in March, is this a bargain-basement value stock?

Bilaal Mohamed has no position in any shares mentioned. The Motley Fool UK has recommended Redrow. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Bank those profits?

With the shares changing hands at 530p earlier today, they’re certainly more popular than they were at 392p back in September. Those that took my advice will be sitting on healthy gains in the region of 35%. Sometimes it pays to be contrarian. So what now? Is it time to bank those paper profits and move on, or perhaps be greedy and hold on in the hope of further gains?

Well, the uncertainties around Brexit certainly haven’t put IAG’s expansion plans on hold. Earlier this month the group, which also owns Spanish airlines Iberia and Vueling, as well as Irish flag carrier Aer Lingus, decided that wasn’t enough to be getting on with, and announced the launch of a new low-cost long-haul airline based in Barcelona.

Hop on board

The new airline, curiously-named Level, will initially be operated by Iberia’s flight and cabin crew and will fly to Los Angeles, San Francisco, Buenos Aires and Punta Cana in the Dominican Republic. As the group’s fifth main airline, Level may eventually fly from other European destinations other than Barcelona.

To me that doesn’t sound like an airline that’s too worried about the strength of the UK economy, Brexit or the sinking pound. It sounds like an airline that’s shrugging off the uncertainties and confidently pressing ahead with its expansion plans. And why not? The latest set of traffic statistics showed a 2.9% increase in group traffic for the month of February, with capacity edging 2.2% higher.

Personally I think the shares still offer great value for investors. With our friends in the Square Mile expecting the group’s revenues to rise to €22.6bn this year and pre-tax profits closing in on €2.4bn, an earnings multiple of just seven seems far too cheap. In my opinion it’s still not too late for investors to hop on board International Consolidated Airlines.

Meet the Fokkers

Another FTSE 100 stalwart that looked undervalued to me back in September is GKN (LSE: GKN). The Redditch-based global engineering group has also outperformed over the last six months, gaining 12% since my last recommendation. With the share price now at two-year highs is it time to cut and run?

2016 was another successful year for the group, with sales up 22% and a strong performance from Dutch aerospace business Fokker Technologies in its first full year of ownership.

With military sales expected to improve this year and a strong commercial order book, I remain bullish on the group’s prospects for growth. Despite a 30% share price rise over the past year I think GKN is still a little undervalued at 11 times forward earnings.

The post These FTSE 100 stocks are trading at bargain levels appeared first on The Motley Fool UK.

More reading

• Are IAG shares the ultimate FTSE 100 volatility play? 
• Up 55% and a P/E of 6.6, is this FTSE 100 share too cheap to miss?
• IAG share price vs budget rivals: which airline share looks better value in 2026?
• The red lights are flashing for this FTSE 100 share! Will it crash?
• After tanking 20% in March, is this a bargain-basement value stock?

Bilaal Mohamed has no position in any shares mentioned. The Motley Fool UK owns shares of GKN. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Too cheap to ignore

International Consolidated Airlines Group (LSE: IAG) was one of the big casualties of the post-Brexit panic, losing a massive 23% of its value on the day following the historic vote. The group, which owns British Airways, Iberia and Aer Lingus, issued a statement the same day saying it didn’t expect the result of the referendum to have any material impact on the business in the long term, and said it continued to expect a significant increase in operating profits in 2016, albeit of a lesser magnitude than in 2015.

In July the group announced positive interim results with operating profit up almost 28% to €710m, compared to €555m reported for the first half of 2015. Within days it was revealed that Qatar Airways had increased its stake in IAG to 20% to take advantage of the attractive valuation and reiterated its confidence in the group’s strategy and management team. I’m with Qatar and agree that the shares are simply too cheap to ignore at just five times forecast earnings for the full year, supported by a solid dividend yield approaching 5%.

Exceptional events

Another airline yet to recover from the Brexit fallout is low-cost carrier EasyJet (LSE: EZJ), with its shares still trading 25% lower than on referendum day despite recent takeover rumours. The company’s third quarter update was somewhat disappointing with a fall in both total revenue and revenue per seat. But passenger numbers rose 5.8% to 20.2m, boosted by a 5.5% increase in capacity to 21.9m seats, and the load factor increasing to 92%.

Personally, I think the Luton-based airline has been a little unlucky with exceptional events such as the Brussels attacks, bad weather and air traffic control strikes leading to a higher-than-usual number of cancellations and affecting third quarter results. The shares offer good value with a forward price-to-earnings ratio falling to just 10 for the year to September 2017, and a healthy 5% prospective dividend yield. The current share price weakness presents itself as a buying opportunity for investors seeking a long-term recovery play with a good level of dividend income.

First choice?

Unlike IAG and EasyJet, the world’s largest tourism group TUI Travel (LSE: TUI) has enjoyed a two-month rally that has seen its shares gain 24% and more importantly regain all the ground lost in the wake of the EU referendum. Shares in the group, which owns a whole host of travel brands including First Choice Holidays and Thomson, look attractive at just 11 times earnings for the year to September 2017, and support a generous dividend yield of 5%. TUI travel remains a good choice for investors seeking a blend of solid income and long-term growth potential.

The post Snap up these FTSE 100 travel bargains before it’s too late! appeared first on The Motley Fool UK.

More reading

• £10,000 invested in easyJet shares on 1 April is now worth…
• easyJet shares have bounced back before. On a P/E ratio of 6, could they do it again?
• Are IAG shares the ultimate FTSE 100 volatility play? 
• Up 55% and a P/E of 6.6, is this FTSE 100 share too cheap to miss?
• IAG share price vs budget rivals: which airline share looks better value in 2026?

Bilaal Mohamed has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.