On Monday, RBC Capital adjusted its outlook on Deutsche Lufthansa AG (LHA:GR) (OTC: OTC:DLAKY), reducing the stock price target to EUR7.50 from the previous EUR8.00. The firm has kept its Sector Perform rating on the airline's shares.
The revision in the price target comes as RBC Capital revises its macroeconomic and unit revenue expectations, leading to a slight reduction in the EBIT forecasts for the years 2024 through 2026. The updated forecast by RBC Capital now anticipates an adjusted EBIT of EUR2.1 billion in 2024, which is slightly below the company's own guidance of around EUR2.2 billion.
Despite the decrease in the price target, RBC Capital's new target still suggests there is considerable upside potential for Deutsche Lufthansa (ETR:LHAG)'s stock. The firm's analyst noted that while there are more attractive risk-reward opportunities elsewhere, the potential for an increase in Lufthansa's stock value is material.
The changes in the financial outlook and the subsequent adjustment of the price target reflect a careful analysis of the expected performance of Deutsche Lufthansa in the coming years. The decision to maintain the Sector Perform rating indicates that the analyst views the airline's stock as adequately valued given the current market conditions.
Investors and market watchers will likely monitor Deutsche Lufthansa's performance closely to see if it aligns with RBC Capital's projections. The airline's ability to meet or exceed the adjusted EBIT forecast could influence future assessments and ratings.
In other recent news, financial research firm CFRA has revised its price target for Deutsche Lufthansa AG, reducing it from EUR7.50 to EUR7.00, while maintaining a Hold rating on the stock. This adjustment, based on a 2024 P/E multiple of 5.4x, reflects Deutsche Lufthansa's average P/E ratio from April 2015 to March 2020, prior to the pandemic.
The firm's analysis indicates that the aviation sector is grappling with several challenges, including disruptions to flights to and from the Middle East for European airlines due to cancellations and rerouting to avoid certain countries' airspace.
A significant factor in this decision is the recent surge in jet fuel costs, which have risen more than 10% in the past three months. This increase led CFRA to revise its earnings per share (EPS) forecasts for Deutsche Lufthansa for the year 2024 to EUR1.32 from EUR1.41, and for 2025 to EUR1.46 from EUR1.49.
While CFRA maintains a Hold opinion on Deutsche Lufthansa shares, it acknowledges the aviation sector's ongoing recovery, despite the rise in competition, as indicated by a decrease in the load factor for the fourth quarter of 2023.
The report also highlights potential increases in operating expenses for airlines due to staffing shortages and the higher cost of jet fuel, which could impact profit margins. These are the recent developments.
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