Today is shaping up negative for International Consolidated Airlines Group, S.A. (LON:IAG) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.
Following the downgrade, the current consensus from International Consolidated Airlines Group's 26 analysts is for revenues of €9.0b in 2021 which - if met - would reflect a major 90% increase on its sales over the past 12 months. Losses are predicted to fall substantially, shrinking 52% to €0.55. Yet before this consensus update, the analysts had been forecasting revenues of €10b and losses of €0.47 per share in 2021. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also expecting losses per share to increase.
There was no major change to the consensus price target of €2.79, signalling that the business is performing roughly in line with expectations, despite lower earnings per share forecasts. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic International Consolidated Airlines Group analyst has a price target of €3.00 per share, while the most pessimistic values it at €2.02. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the International Consolidated Airlines Group's past performance and to peers in the same industry. One thing stands out from these estimates, which is that International Consolidated Airlines Group is forecast to grow faster in the future than it has in the past, with revenues expected to display 262% annualised growth until the end of 2021. If achieved, this would be a much better result than the 14% annual decline over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in the industry are forecast to see their revenue grow 29% per year. Not only are International Consolidated Airlines Group's revenues expected to improve, it seems that the analysts are also expecting it to grow faster than the wider industry.
The Bottom Line
The most important thing to note from this downgrade is that the consensus increased its forecast losses this year, suggesting all may not be well at International Consolidated Airlines Group. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. The lack of change in the price target is puzzling in light of the downgrade but, with a serious decline expected this year, we wouldn't be surprised if investors were a bit wary of International Consolidated Airlines Group.
As you can see, the analysts clearly aren't bullish, and there might be good reason for that. We've identified some potential issues with International Consolidated Airlines Group's financials, such as major dilution from new stock issuance in the past year. For more information, you can click here to discover this and the 1 other concern we've identified.
Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
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