Credit Suisse lifts target price for IAG

Credit Suisse has hiked its target price for International Airlines Group (IAG) from 678p to 750p after the British Airways and Iberia owner beat estimates with its annual results last week.

The bank reiterated its ‘outperform’ rating, saying “quality [is] shining through” at the airline conglomerate.

Despite a 1.5% pricing decline, Credit Suisse has hiked its 2015 forecast for earnings before interest and tax (EBIT) by 12% to €2.3bn, helped by a 3% ex-fuel unit cost saving. This is ahead of the company’s own guidance of €2.2bn.

Meanwhile, the bank has also raised its 2016 EBIT estimate by 5% to €2.95bn, implying 112% growth over two years.

Credit Suisse said: “2015 prospects emphasise (i) pricing power, while peers suffer pricing weakness as fuel price tailwinds are competed away, (ii) self-help momentum from a commercial as well as an efficiency perspective […], and (iii) returns focused capacity deployment from a full London Heathrow in particular.

“Earnings momentum strengthens our confidence in margin accretion, returns development and free cash flow generation, and we think favourable competitive positioning and strong execution ensures a high degree of earnings control while peer earnings are more dictated by competitor actions.”

The stock was up 0.3% at 581.5p by 11:31.