Barclays reinstates IAG at 'overweight', names it top pick in European transport

Barclays reinstated its coverage of International Consolidated Airlines Group at ‘overweight’ with a 750p price target.

The bank said it expects fuel to propel IAG to the top end of its 10-14% 2016-20 EBIT margin targets as soon as next year.

Despite cautious yield assumptions, Barclays still sees 45% full-year 2016 earnings per share growth. But more importantly, it argued that IAG can sustainably beat its mid-cycle targets, based on the sheer scale of structural ex-fuel cost and revenue improvements it has identified across the group.

“We believe this business really can generate cash through the cycle – something which is not nearly reflected in its current valuation,” it said, adding that IAG is now its top pick in the European transport sector.

“Thanks to successful restructuring, favourable exposure towards consolidating markets, and a truly disciplined management team, we think it is hard to deny that IAG is making clear progress towards its goals.”

At 1548 BST, IAG shares were up 2.6% at 531.50p.