Broker tips: IAG, Dr. Martens, Ascential
By Alexander Bueso
Date: Wednesday 27 Mar 2024
(Sharecast News) - JPMorgan Cazenove placed shares of BA and Iberia owner IAG on 'positive catalyst watch' on Wednesday ahead of first-quarter results and following minor changes to estimates published yesterday.
JPM noted that Q1 is seasonally the smallest quarter in terms of EBIT contribution for the network carriers, and seasonality has shifted more towards Q2-Q3 post pandemic given the strong leisure demand and lack of full corporate recovery.
"However, in our view the Q1 results could be a catalyst to spur consensus 2024E EBIT upgrades on the stock, given a more positive pricing backdrop both for Q1 and into the summer (we currently forecast passenger unit revenue growth up slightly for 2024E)," it said.
"We would not anticipate any cost offsets (excluding any unexpected disruption), with Q1 expected to be the worst quarter for ex-fuel CASK (cost of available seat kilometre) pressure, and included within the +1-2% 2024E guidance already."
JPM is forecasting 2024E EBIT of €3.7bn - no explicit guidance was given previously at the 2023 results - which is around 8% ahead of Bloomberg median consensus.
The bank has an 'overweight' rating on the stock and a €2.50 price target.
RBC Capital Markets cut its price target on Dr Martens on Wednesday to 85p from 100p as it lowered its estimates for FY24-26 earnings per share by 7% to 10%.
The bank said Dr Martens should be able to deliver on materially lower guided and consensus expectations for FY24, due 30 May.
The bank said Spring/Summer shipment timings could be a swing factor, however it believes Q4 DTC trends will be an important data point as well as FY25.
RBC said it expects the company's FY25 guidance to strike a "cautious tone". It expects revenue guidance of 'mid-single digit' and an EBITDA guidance range of £200m to £210m, which implies mid-high single-digit growth year-on-year.
RBC rates the shares at 'sector perform'.
Analysts at Citi told clients they saw more than 20% upside in shares of Ascential, when not more.
That was true even when factoring in "conservative" valuations for the company's stake in Hudson MX and for its core Events business, they said in a research note sent to clients.
Indeed, their 225p target price together with the expected special dividend yielded a 'fair value' for the shares of 380p in "today's money".
Furthermore, a blue sky scenario in which the events business was valued at 12 times EV/EBITDA and Hudson MX sold for over £100m would result in a fair value of 450p per share.
Citi analysts said they remained buyers of the shares.
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