Key Takeaways
- Strong traffic growth and expansion in commercial revenue streams such as car rentals and VIP services enhance earnings potential.
- Strategic expansions at Luton Airport and real estate developments at Barcelona Airport promise significant long-term revenue and profitability boosts.
- Supply chain disruptions, rising costs, and market uncertainties threaten Aena's revenue growth and profitability by impacting demand, capacity, and operational expenses.
Catalysts
About Aena S.M.E- Engages in the management of airports in Spain, Brazil, the United Kingdom, Mexico, and Colombia.
- Aena is experiencing strong growth in traffic, with a 4.9% year-over-year increase and a record high in first-quarter traffic, which could support future revenue growth.
- Expansion of commercial revenue streams, such as car rentals and VIP services, which saw year-over-year revenue increases of 32.7% and 33.7%, respectively, is likely to positively impact earnings.
- The expansion approval at Luton Airport from 19 million to 32 million passengers opens potential for significant future traffic and revenue increases, affecting net margins positively.
- The addition of duty-free and retail spaces, with significant revenue growth (duty-free sales up 19%) and a strong tenant mix, is expected to drive higher revenue per passenger and improve net profitability.
- Real estate developments, including logistic projects at Barcelona Airport, provide long-term revenue opportunities and diversification of earnings streams.
Aena S.M.E Future Earnings and Revenue Growth
Assumptions
How have these above catalysts been quantified?- Analysts are assuming Aena S.M.E's revenue will grow by 4.3% annually over the next 3 years.
- Analysts assume that profit margins will increase from 33.5% today to 34.6% in 3 years time.
- Analysts expect earnings to reach €2.3 billion (and earnings per share of €1.52) by about July 2028, up from €2.0 billion today. However, there is some disagreement amongst the analysts with the more bullish ones expecting earnings as high as €2.5 billion.
- In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 19.9x on those 2028 earnings, up from 17.8x today. This future PE is greater than the current PE for the GB Infrastructure industry at 17.9x.
- Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
- To value all of this in today's terms, we will use a discount rate of 9.44%, as per the Simply Wall St company report.
Aena S.M.E Future Earnings Per Share Growth
Risks
What could happen that would invalidate this narrative?- The potential slowdown in domestic market demand and early indicators of weaker U.S. market demand could negatively impact future traffic forecasts, thereby affecting revenues.
- Aircraft shortages and spare part supply chain issues could interfere with operations, potentially reducing capacity and subsequently impacting both revenue and earnings.
- Rising energy costs without full hedging coverage could increase operating expenses, thus putting pressure on net margins and profitability.
- Political and economic uncertainties, along with increasing airfreight and accommodation prices in Spain, might dampen travel demand, impacting traffic volumes and associated revenues.
- The potential impact of supply chain issues and economic uncertainties on domestic pricing could also reduce consumer spending at airport outlets, affecting commercial revenue growth.
Valuation
How have all the factors above been brought together to estimate a fair value?- The analysts have a consensus price target of €23.379 for Aena S.M.E based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €28.0, and the most bearish reporting a price target of just €17.5.
- In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €6.7 billion, earnings will come to €2.3 billion, and it would be trading on a PE ratio of 19.9x, assuming you use a discount rate of 9.4%.
- Given the current share price of €23.47, the analyst price target of €23.38 is 0.4% lower. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
- 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.
How well do narratives help inform your perspective?
Disclaimer
AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.