On Monday, BMO Capital Markets adjusted its financial outlook for shares of Air Canada (AC:CN) (OTC: ACDVF), raising the airline's price target to C$29.00 from C$28.00. The firm reiterated its Outperform rating on the stock, signaling confidence in the company's future performance.
The upgrade comes ahead of an anticipated detailed announcement from Air Canada on December 17, where the airline is expected to present a strategy that would enhance margins and support earnings before interest, taxes, depreciation, and amortization (EBITDA) growth.
From an estimated ~C$3.5 billion in fiscal year 2024, EBITDA is projected to increase to over C$4.6 billion by fiscal year 2027 and exceed C$5.0 billion by 2028.
BMO Capital's revised forecast for fiscal year 2025 sees Air Canada's EBITDA rising by approximately 1% to C$3.6 billion, slightly above the consensus of C$3.5 billion. Further insights into the fiscal year 2025 outlook are expected to be shared during the December 17 presentation.
The analyst from BMO Capital highlighted that despite the capital expenditures required for growth, Air Canada might still manage to return significant value to shareholders. Over the next four years, cumulative distributions to shareholders could approach C$4 billion, which is about 50% of the current market capitalization, while keeping leverage below 1.5 times.
This financial strategy and the raised target price reflect BMO Capital's optimism about Air Canada's ability to grow and deliver shareholder value while maintaining a strong balance sheet.
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