Tuesday, Fraport AG Frankfurt Airport Services Worldwide (FRA:GR) (OTC: FPRUY) maintained its Hold rating and a price target of EUR50.00, as confirmed by CFRA. The valuation is based on a projected 2025 enterprise value-to-EBITDA (EV/EBITDA) multiple of 9x, which is below the average multiple of 10x for its peers. This lower multiple is considered appropriate due to Fraport's weaker free cash flow (FCF) performance.
In the first quarter of 2024, Fraport's adjusted EBITDA reached EUR185 million, marking a 35% year-over-year increase and aligning with consensus expectations. This financial performance was propelled by a surge in passenger traffic, robust retail spending, and higher airport charges. Despite these positive factors, the recovery of passenger numbers at Frankfurt Airport, Fraport's principal asset, to 85% of the 2019 level, did not match the pace of its competitor Aena, which reported traffic figures for the same period at 13% above the 2019 level.
CFRA attributed the slower recovery of traffic at Frankfurt Airport to a combination of reduced business travel and strike-related flight cancellations during the first quarter of 2024. The airport managed to welcome 12.5 million passengers, which, although significant, lagged behind some of its peers in the industry.
Fraport has reiterated its full-year 2024 guidance, which includes traffic at Frankfurt Airport estimated to be between 61 million and 65 million passengers, representing 86% to 92% of the volume seen in 2019. The company also forecasts an EBITDA ranging from EUR1.26 billion to EUR1.36 billion, a net profit between EUR435 million and EUR530 million, net debt of EUR8.2 billion to EUR8.4 billion, and a negative free cash flow of EUR490 million to EUR690 million. These projections indicate a cautious optimism for the company's financial trajectory in the near term.
InvestingPro Insights
As Fraport AG Frankfurt Airport Services Worldwide (FRA:GR) (OTC: FPRUY) navigates the post-pandemic recovery, investors are closely monitoring its financial health and stock performance. With a market capitalization of $5.06 billion and a P/E ratio of 11.77, Fraport's valuation reflects its current market sentiment. The company's revenue growth impresses, with a 25.25% increase over the last twelve months as of Q4 2023, and a quarterly revenue growth of 18.0% in Q1 2023. This growth is a testament to the robust retail spending and higher airport charges mentioned in the article.
One of the key InvestingPro Tips highlights that Fraport operates with a significant debt burden, which aligns with the article's mention of the company's net debt projections for 2024. However, it's worth noting that Fraport's liquid assets exceed its short-term obligations, providing some financial flexibility in the near term. Another tip to consider is that analysts predict the company will be profitable this year, aligning with the company's own net profit forecast mentioned in the article.
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