On Monday, Citi maintained its Buy rating on Grupo Aeroportuario del Pacifico (NYSE:PAC), while slightly increasing the price target from $204.00 to $206.00.
The firm's analyst cited a combination of better-than-expected third-quarter traffic and a weaker Mexican peso at the end of September as key factors influencing the updated model.
The revised price target reflects a nuanced view of the company's financial prospects, with the Citi analyst adjusting the third-quarter 2024 earnings per American depositary share (EPADS) forecast for Grupo Aeroportuario del Pacifico down from $2.39 to $2.28. Furthermore, the full-year EPADS estimates have been revised downwards to $9.86 for the current year, $12.12 for the next year, and $15.17 for 2026, from the previous forecasts of $10.27, $13.09, and $15.48, respectively.
Despite these downward revisions, the decrease in U.S. treasury yields has led to a lower weighted average cost of capital (WACC) for the Mexican airport operator, dropping from 9.2% to 9%. This change has positively impacted the discounted cash flow (DCF) calculations used by Citi to determine the target price for Grupo Aeroportuario del Pacifico, resulting in the slight increase in the price target.
The analyst's statement highlighted that, although the EBITDA estimates for the company remain relatively unchanged, the lower WACC was a significant enough factor to warrant the adjustment in the DCF target price, hence the new price target of $206 per American depositary receipt (ADR).
Grupo Aeroportuario del Pacifico operates a number of important airports in Mexico and has been the subject of financial analysis due to its performance and the economic factors influencing its operations.
In other recent news, Grupo Aeroportuario del Pacifico (GAP) has seen significant developments. Scotiabank recently downgraded GAP's stock rating from Sector Outperform to Sector Perform, adjusting the price target to Peso384.00, down from Peso400.00. This adjustment factors in GAP's new Master Development Plan and potential valuation changes due to operational challenges faced by business partners such as Volaris.
JPMorgan also downgraded GAP's stock from Neutral to Underweight, setting a new price target of Peso365.00, suggesting limited growth potential. Both Scotiabank and JPMorgan's assessments reflect a shift in market expectations for GAP's financial performance.
Despite a 3.9% decrease in total passenger traffic in the second quarter of 2024, GAP plans to expand its routes and integrate the recently acquired cargo company, GWTC, into its operations starting from the third quarter of 2024. Commercial revenue has increased, particularly from food and beverage, car rentals, and VIP lounges. However, the company's EBITDA decreased by 8.3% and cash and cash equivalents fell by 15.7%.
In addition to these developments, GAP is bidding for the Turks and Caicos airports, and anticipates a gradual traffic and capacity recovery expected in 2025, with a full recovery by the first half of 2026.
InvestingPro Insights
To complement Citi's analysis of Grupo Aeroportuario del Pacifico (NYSE:PAC), recent data from InvestingPro offers additional perspective on the company's financial health and market position. PAC's market capitalization stands at $8.73 billion, with a P/E ratio of 18.21, indicating a moderate valuation relative to earnings.
InvestingPro Tips highlight PAC's impressive gross profit margins, which align with the company's strong operational performance noted in Citi's report. The data shows a gross profit margin of 78.88% for the last twelve months as of Q2 2024, underscoring the company's efficiency in managing costs associated with its airport operations.
Another relevant InvestingPro Tip points out that PAC has raised its dividend for 3 consecutive years, which may be of interest to income-focused investors. However, it's worth noting that the dividend growth rate has seen a decline of 26.83% in the last twelve months, which could be a factor for investors to monitor.
For readers seeking a more comprehensive analysis, InvestingPro offers 12 additional tips on PAC, providing a broader picture of the company's financial strengths and potential risks.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.