JPMorgan reiterates 'overweight' on IAG despite Q3 miss

(Sharecast News) - JPMorgan reiterated its 'overweight' rating on IAG on Monday despite the BA and Iberia owner's weaker-than-expected third-quarter results last week. "IAG missed Q3 25 expectations driven by softer than expected yields, including a weaker Transatlantic, and despite our expectations did not announce a new share buyback," it said.

"While this was disappointing, we expect a positive Q4 earnings trajectory driven by sequentially improving revenue/costs, allowing for increasing capital returns, which are likely to be announced with the full-year results in February 2026."

JPM said its 2025/26/27E EBIT estimates are broadly unchanged, with slightly lower ex-fuel offsetting higher fuel costs for 2025E.

The bank said its unchanged price target of €5.50 implies more than 30% upside.

JPM said it sees three areas of opportunity in the near term. It noted that booked revenue is ahead for the fourth quarter and said it sees scope for improving Transatlantic demand, supported by continued constrained supply, to drive an increase in underlying pricing versus Q3.

JPM also said it expects strong unit cost control to continue into Q4, where it forecasts ex-fuel CASK -1.4%.

Finally, the bank said IAG's strong financial position can support increasing capital returns, with its base case a €1.5bn buyback announced at the FY25 results.

JPM said it sees the current valuation as compelling at 5.5x 2026E price-to-earnings and a 14% free cash flow yield.

"IAG remains on the 'Analyst Focus List' and is our top pick within the European Airlines," it said.