On Tuesday, Citi updated its financial model for Deutsche Lufthansa AG (LHA:GR) (OTC: OTC:DLAKY) shares, leading to a revised price target of EUR5.50, up from the previous EUR5.00. Despite the increase, the firm continues to hold a Sell rating on the airline's shares.
The adjustment comes ahead of the company's third-quarter results for 2024. Citi now anticipates Deutsche Lufthansa (ETR:LHAG) AG to report an adjusted EBIT of EUR1.6 billion for the full year 2024. This forecast is above the airline's own guidance range of EUR1.4 billion to EUR1.8 billion and an increase from Citi's prior estimate of EUR1.5 billion.
The revised estimates are primarily attributed to reduced fuel expenses and improved pricing within the cargo segment. According to Citi's analysis, these factors have positively impacted the airline's financial outlook.
Citi also noted that their projections are consistent with Lufthansa's capacity growth expectations. For the third quarter, capacity is anticipated to reach 96% of the levels seen in 2019, and for the full year 2024, it is expected to be at 92% of the 2019 capacity.
The new target price of EUR5.50 reflects Citi's updated estimates and the anticipated performance of Deutsche Lufthansa AG in the near term.
In other recent news, escalating tensions in the Middle East have led to significant adjustments in international flight schedules. Major airlines such as Aegean Airlines, Air Algerie, AirBaltic, Air Europa, and the Air France-KLM group have suspended or canceled flights to regions including Lebanon, Israel, Iran, and Iraq. Delta Air Lines (NYSE:DAL), Emirates, Flydubai, and the International Airlines Group (LON:ICAG) (IAG) have also made similar changes to their flight schedules.
The Greek carrier Aegean Airlines has canceled flights to Beirut and Tel Aviv until late October, while Algeria's national airline, Air Algerie, has indefinitely suspended flights to Lebanon. AirBaltic from Latvia and Spain's Air Europa have also halted their flights to Tel Aviv until the end of October.
The Franco-Dutch Air France-KLM group has extended its suspension of flights from Paris to Tel Aviv and Beirut until mid-October and late October respectively. India's national carrier, Air India, and Bulgaria Air have also suspended their flights to Israel with no set date for resumption.
In the United States, Delta Air Lines has paused its New York-Tel Aviv route until the end of the year. United Airlines has also suspended flights to Tel Aviv indefinitely. These recent developments are being closely monitored by the airline industry, with further updates expected as the situation in the Middle East evolves.
InvestingPro Insights
While Citi maintains a Sell rating on Deutsche Lufthansa AG (OTC: DLAKY), InvestingPro data offers a nuanced perspective on the company's financial position. The airline's P/E ratio of 7.98 and adjusted P/E ratio of 6.63 for the last twelve months as of Q2 2024 suggest that the stock is trading at a relatively low earnings multiple. This valuation metric aligns with one of the InvestingPro Tips, which highlights that DLAKY is "trading at a low earnings multiple."
Additionally, the company's revenue growth of 6.2% over the last twelve months indicates positive momentum, which could support Citi's increased EBIT forecast. However, investors should note that DLAKY's EBITDA growth for the same period was -30.2%, suggesting some challenges in maintaining profitability margins.
An InvestingPro Tip points out that DLAKY is a "prominent player in the Passenger Airlines industry," which may provide some resilience as the sector continues to recover. The company's dividend yield of 3.09% as of the latest data could also be attractive to income-focused investors.
For those interested in a deeper analysis, InvestingPro offers 5 additional tips that could provide further insights into Deutsche Lufthansa's financial health and market position.
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