On Thursday, CFRA lowered its rating on shares of Deutsche Lufthansa AG (LHA:GR) (OTC: OTC:DLAKY) from Buy to Hold and adjusted the price target to EUR7.50 from the previous EUR8.50. The revised price target is based on a forward price-to-earnings (P/E) multiple of 5.4x on the 2024 earnings per share (EPS) forecast, aligning with the airline's average P/E valuation from April 2015 to March 2020, prior to the pandemic.
Deutsche Lufthansa (ETR:LHAG)'s fourth quarter 2023 adjusted earnings before interest and taxes (EBIT) of EUR402 million marked a 31% year-over-year decline, falling short of the consensus estimate of EUR419 million. The performance dip was attributed to weaker-than-expected revenue growth, which saw only a 5% increase in the fourth quarter. Despite a 13% year-over-year rise in passenger volume to 29.3 million, the airline's load factor—a measure of how full flights are—slightly decreased by 0.7 percentage points to 81.3%.
CFRA also revised its 2024 EPS forecast for Lufthansa, lowering it to EUR1.41 from EUR1.57, while introducing a 2025 EPS estimate of EUR1.49. The downgrade to Hold reflects a cautious stance on the stock amidst the competitive landscape in the aviation sector, which is suggested by the decline in load factor. Additionally, staff shortages have led to increased operating expenses for airlines, impacting profit margins.
Despite these challenges, there are positive developments for Lufthansa, including the resumption of dividend payments. The airline has proposed a dividend of EUR0.30, signaling a potential recovery in its financial position. The aviation sector overall remains on a path to recovery, but heightened competition and operational costs are influencing investment outlooks.
InvestingPro Insights
As Deutsche Lufthansa AG (LHA:GR) (OTC: DLAKY) navigates the competitive airline industry landscape, recent data from InvestingPro reveals some key financial metrics that may interest investors. With a current market capitalization of $9.11 billion, the company is trading at an attractive low earnings multiple, with a P/E Ratio of just 4.38, which is even lower than the adjusted P/E ratio for the last twelve months as of Q3 2023 at 4.14. This positions the airline as an intriguing option for value-oriented investors.
InvestingPro Tips highlight that Deutsche Lufthansa is a prominent player in the Passenger Airlines industry, and analysts predict the company will be profitable this year. In fact, the company has been profitable over the last twelve months. Revenue growth has also been robust, with a 30.07% increase in the last twelve months as of Q3 2023, which could indicate a strong recovery trajectory post-pandemic. However, it's worth noting that the stock price movements have been quite volatile, which might be a consideration for risk-averse investors.
For those looking to delve deeper into the financial health and future prospects of Deutsche Lufthansa, InvestingPro offers additional insights. There are currently 9 more InvestingPro Tips available, which could provide valuable context and guidance. Interested readers can access these tips and make more informed decisions using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.
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