Analysts at Barclays raised their rating for Lufthansa (DLAKY (OTC:)) shares to Overweight from Equal Weight on Wednesday, lifting the stock price target to EUR9 from EUR7.30 per share following its first-quarter results.
While the bank acknowledged first quarter labor challenges weighed on the business, it believes the company’s full-year 2024 estimates are “grounded.”
“We think that the profit warning that accompanied the pre-release of 1Q results has secured a base level of expectations for FY24,” states Barclays.
The bank adds: “In recent weeks Lufthansa has secured two- to three-year labour agreements with Lufthansa ground and cabin staff, Austrian cockpit and cabin crew and Eurowings pilots. The threat of industrial action appears reduced.”
Furthermore, Barclays feels the stock is relatively inexpensive, while they note the company has one of the stronger balance sheets in the sector and trades at a 65% discount to its estimated net asset value.
“For all these valuation considerations, we see airlines as earnings-momentum stocks,” comments Barclays. “We expect the 1H24 results to be constructive, with strong summer demand trends bumping into tight capacity and thus delivering encouraging unit revenues.”
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