International Consolidated Airline (LON: IAG) share price is firing on all cylinders this year as it continued to outperform most companies in the industry. It has risen in the past nine consecutive weeks, reaching a high of 209.7p, its highest point since May 2021.
Also, the stock has jumped by over 130% from its lowest level in 2022 as it continued to outperform the FTSE 100 index. As shown below, it has also underperformed the likes of American Airlines, United Airlines, Delta, and EasyJet this year.
The same has happened in the last 12 months as the stock has jumped by 40% while the other companies have risen by less than 28%.
Airline industry is doing well
IAG is one of the biggest airline companies in the world with over 580 planes and more than 71k employees globally.
It owns brands like British Airways, Iberia, Vueling, Aer Lingus, and LEVEL. In addition to this, the company owns IAG Loyalty and IAG Cargo. In its loyalty business, customers can earn points, which are known as Avios, and which can be spent in shopping.
IAG’s cargo business is one of the biggest names in the industry and offers over 15,000 flights a week.
IAG’s best-known brand is British Airways, which has over 280 aircraft that fly from London to all continents. Its fleet is made up of planes like Airbus A320, A350, A380, and Boeing 787 and 777.
IAG’s business has been doing well since the pandemic ended as the number of leisure and business travel clients increased.
The most recent data by IATA showed that airline profits are expected to jump to over $30.5 billion this year, a $3 billion increase from 2023. Return on invested capital will be 5.7% while the total revenue in the industry will rise to over $996 billion.
IAG is also benefiting from the growth of the cargo business. Total cargo volume is expected to come in at 62 million tons this year.
The challenge, however, is mostly coming from manufacturers like Airbus and Boeing, which are going through manufacturing challenges.
While Airbus is doing better than Boeing, it is going through shortage of critical materials like semiconductors and titanium. In June, the company announced that it was scaling down its production targets. Boeing, on the other hand, is going through a worse period as workers have gone on strike.
IAG business is doing well
IAG’s business is doing well, helped by the robust demand for its Transatlantic business, which is benefiting from leisure and business travel.
The most recent financial results revealed that its business did well in the first half of the year as its revenue jumped from over €13.58 billion to over €14.7 billion.
This growth happened profitably as its operating profit jumped from €1.26 billion to over €1.3 billion. Its profit after tax was €905 million. As a result, the company boosted its forward guidance as its business continued doing well.
Most importantly, IAG has started paying dividends. It announced a €3 per share dividend, which it expects to continue growing in the coming years. It has also reduced its net debt from over €9.245 billion to €6.417 billion.
Outlook for the IAG stock
IAG stock has benefited from strong demand and positive statements from analysts, especially after it boosted its flights to North America.
Analysts at JP Morgan recently stuck with their buy rating on the stock. Similarly, those at Redburn Atlantic and RBC Capital Markets boosted their rating to buy while UBS stuck with its neutral case.
The challenge, however, is that airlines are some of the most cyclical assets in the market. A good example of this is Ryanair, which was one of the best-performing companies in London this year. Its ADRs peaked at $147.30 in April and then crashed to the current $116.
The other good example is Southwest, which was often seen as the best airline company in the US. Its stock peaked at $60 in 2021 and has dropped to below $30 today.
IAG share price analysis
The weekly chart shows that the IAG stock price has been in a strong bullish trend in the past few months. It recently crossed the important resistance point at 171.70p, its highest level in January 2023.
The stock is about to form the rare golden cross pattern, which happens when the 50-week and 200-week moving averages are about to form a bullish crossover. The spread between the two averages has continued narrowing.
Therefore, if this crossover happens, there is a likelihood that the stock will continue rising as bulls target the next important resistance point at 219.4p, its highest point in March 2021. A break above that point will lead to more upside. If the golden cross fails to happen, the next point to watch will be a pullback to 180p.
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