Terminal 3 Expansion And Office Park 4 Will Boost Future Earnings

Key Takeaways

• Strategic infrastructure investments aim to boost future revenue and profits with enhanced capacity and operational efficiencies.
  
• Strong financial position and partnerships support resilience and growth despite personnel cost increases.
  
• Increased costs due to regulations, labor, and geopolitical instability could pressure margins and limit revenue growth, impacting Flughafen Wien's competitive position and financial performance.

Catalysts

Engages in the construction and operation of civil airports and related facilities in Austria and Malta.

• Flughafen Wien is undertaking significant capital investments, including the expansion of Terminal 3 and the construction of Office Park 4, which are expected to generate additional revenue and profits once completed. These projects are planned to be delivered within budget and on schedule, positively impacting future revenue and earnings.
  
• The development of additional infrastructure, such as the potential third runway and extensions at Malta Airport, is intended to accommodate future passenger and cargo growth, thereby increasing capacity and potentially boosting long-term revenue.
  
• Strengthening partnerships with major international airports and airlines aims to enhance route and cargo development, which could lead to increased passenger and cargo volumes, positively affecting revenue and potentially boosting net margins due to improved operational scale.
  
• Despite higher personnel costs due to collective bargaining agreements and workforce expansion, strategic investments in technology and infrastructure are expected to maintain or improve operational efficiencies, potentially preserving net margins as revenue grows.
  
• The strong financial position, marked by improved liquidity and a stable cash flow, coupled with a focus on maintaining high service quality and operational punctuality, supports resilience against economic uncertainties and provides a stable platform for future earnings growth.

Flughafen Wien Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Flughafen Wien's revenue will grow by 3.7% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 20.3% today to 19.4% in 3 years time.
• Analysts expect earnings to reach €230.9 million (and earnings per share of €2.75) by about May 2028, up from €216.3 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 26.0x on those 2028 earnings, up from 20.8x today. This future PE is greater than the current PE for the GB Infrastructure industry at 20.9x.
• Analysts expect the number of shares outstanding to decline by 0.18% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.82%, as per the Simply Wall St company report.

Flughafen Wien Future Earnings Per Share Growth

Risks

• The European Union's stringent regulations on sustainable aviation fuels and CO2 pricing could lead to higher operating costs, reducing net margins and affecting the company's competitive position compared to airports outside the EU.
  
• The expansion of emission certificate trading scheduled for January 2027 is expected to drive inflation, potentially negatively impacting Europe's economic position and indirectly affecting revenues.
  
• Personnel expenses rose by 10.5% in 2024 due to a new collective agreement and an increased headcount; continued growth in such expenses could pressure profit margins if not matched by corresponding revenue increases.
  
• The construction and development projects such as Terminal 3's South expansion and other infrastructure investments carry execution risks, which could affect financial performance if they exceed budget or do not deliver expected revenue growth.
  
• The economic situation remains poor, and a high ticket cost environment could limit passenger growth, impacting revenue streams; geopolitical instability in regions like Ukraine and the Middle East also poses risks to traffic and revenue projections.

Valuation

• The analysts have a consensus price target of €59.4 for Flughafen Wien based on their expectations of its future earnings growth, profit margins and other risk factors.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €1.2 billion, earnings will come to €230.9 million, and it would be trading on a PE ratio of 26.0x, assuming you use a discount rate of 6.8%.
• Given the current share price of €53.6, the analyst price target of €59.4 is 9.8% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.