- Forecast-beating Q4 results
- €1 billion buyback
- Confident of ‘sustainable’ EPS growth this year
High-flying International Consolidated Airlines (IAG) climbed 5% to 354p after the British Airways-owner reported forecast-beating fourth quarter earnings and announced a €1 billion share buyback.
This bumper return of capital demonstrates management’s confidence in the company’s long-term prospects, strategy and business model.
The airline operator behind Iberia, Aer Lingus and Vueling hailed the success of its transformation programme after delivering top and bottom line growth for 2024 and said it expects to deliver ‘sustainable earnings per share growth’ in 2025.
BRITISH AIRWAYS OWNER DELIVERS ‘BEAT’
For the fourth quarter to 31 December 2024, IAG’s operating profit before exceptional items more than doubled to €1.12 billion, breezing past the €754 million consensus estimate, as revenue rose 11.4% to north of €8 billion.
For 2024 as a whole, operating profit before exceptional items surged 26.7% higher to €4.4 billion as the company continued to execute its transformation programme.
Passenger revenue ticked up 9.5% to €28.3 billion in 2024, thanks to the reopening of markets and strong leisure demand, together with increases in ticket prices to reflect inflation.
WHAT DID THE CEO SAY?
Luis Gallego, CEO, insisted these results highlight ‘the quality of our businesses and effectiveness of our strategy, underpinned by the successful execution of our transformation programme across the group. We are delivering world-class margins and returns, in line with the targets we set out to the market just over a year ago.’
Gallego added: ‘We are particularly pleased to announce that IAG is proposing a final dividend which takes our total dividend for the year to €435 million and intend to return up to a further €1 billion of excess capital to shareholders in up to 12 months.’
STORMIER WEATHER AHEAD?
Russ Mould, investment director at AJ Bell, commented: ‘More dividends, more share buybacks; it’s remarkable how far IAG has travelled since the depths of the pandemic when it was drowning in debt. Having nursed its balance sheet back to good health, the airline operator has got itself in a comfortable enough position to reward shareholders while continuing to invest in expanding its fleet of aircraft.’
Mould continued: ‘It has enjoyed growth in revenue, operating profit, free cash flow and margins - everything that an investor hopes a company will do. So far so good, but the outlook might not be as rosy as IAG implies. It flags strong customer demand yet concerns about the global economic outlook imply stormier weather for airlines.
‘Consumers might not feel as flush with their cash, while business travellers could look to do more meetings virtually if their employer is seeking cost efficiencies.’
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (James Crux) and the editor (Martin Gamble) own shares in AJ Bell.
