Air Canada 'significantly undervalued' compared to industry peers, say analysts

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Air Canada أخبار

Tom Fitzgerald,Helane Becker,Cameron Doerksen

'2024 has been a volatile year for the shares, but we expect margins to have bottomed this year and think the name is set up well against a lowered bar.'

, some analysts say the company is"significantly undervalued" compared to its peers and opportunity lies ahead if the deal is ratified. REUTERS/Carlos Osorio/File Photo, some analysts say the company is "significantly undervalued" compared to its peers, and opportunity lies ahead for investors if the deal is ratified.

The analysts lowered third-quarter and fourth-quarter earnings estimates for Air Canada due to expected pilot wage inflation and customers likely booking away from the airline because of fear of a pilot strike, but expect that margins "have bottomed this year" and will improve going forward. They have a "buy" rating on Air Canada's stock, and a price target of $19 per share.

Shares of Air Canada have struggled this year and are down about 12 per cent year-to-date. The weakness in share price performance is in part because of some of the earlier uncertainty surrounding the pilot deal. While post-pandemic pent-up demand helped fuel a travel recovery through 2023, there have also been broad industry concerns about air travel demand waning.

"Looking at Q4, however, capacity growth is decelerating which could help drive some yield improvement heading into 2025."But there remains a risk for the outlook for Air Canada – that the pilot union rejects the tentative four-year agreement. Doerksen says that although the total pay increase of the tentative agreement is at the high end of expectations, he estimates the total cost increase for the airline will be around 2.5 per cent over the four years, something that is "manageable" for Air Canada.

Compass Group, the FTSE-100 catering giant which counts the Wimbledon tennis championships among its most prestigious contracts, is in talks with its investors about increasing its boss's potential pay package by millions of pounds a year. Sky News has learnt that Compass is consulting its biggest institutional shareholders about substantial hikes to the annual bonus and long-term share award it can hand to Dominic Blakemore, its chief executive since 2018.

 

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