On Wednesday, Fraport AG Frankfurt Airport Services Worldwide (FRA:GR) (OTC: FPRUY) received an upgrade from Jefferies, shifting its stock rating from Underperform to Hold. Accompanying this change, the firm set a price target for Fraport AG at €51.00.
The upgrade comes amid a broader recovery in the aviation sector, where most international airport hubs have reported traffic levels surpassing those of 2019. Additionally, retail sales per passenger have seen a boost from inflation and robust consumer demand following the reopening of economies.
Fraport AG, the operator of Frankfurt Airport, has been noted as an underperformer compared to its European and global counterparts. The company's performance has been particularly affected by its significant exposure to business travel and Asian markets, which have been slower to rebound. Moreover, the airport has faced challenges in 2024 due to strikes and extreme weather conditions, impacting its operations.
Despite these issues, Jefferies does not foresee a significant improvement in operational performance in the near term. However, the firm acknowledges that Fraport's valuation is nearing the lower end of its historical range. With the company's 2024 guidance considered achievable, Jefferies sees limited downside risk, prompting the upgrade to a Hold status.
Investors and market watchers will be keeping a close eye on Fraport AG as it navigates the evolving landscape of international travel and strives to meet its projected targets for the year.
In other recent news, Fraport AG Frankfurt Airport Services Worldwide has been held at a target price of EUR50.00 by CFRA, due to concerns over the company's cash flow. The rating is based on an estimated 2025 enterprise value-to-EBITDA multiple of 9x, lower than the industry average, reflecting Fraport's weaker free cash flow performance.
In the first quarter of 2024, Fraport reported a 35% year-over-year increase in adjusted EBITDA to EUR185 million, driven by increased passenger traffic, retail spending, and airport charges.
Despite these positive factors, Fraport's recovery pace, particularly at Frankfurt Airport, was slower than competitor Aena, with traffic at 85% of 2019 levels compared to Aena's 13% above 2019 levels. CFRA attributes this slower recovery to reduced business travel and strike-related flight cancellations.
Fraport's full-year 2024 guidance anticipates Frankfurt Airport traffic between 61 million and 65 million passengers, an EBITDA between EUR1.26 billion and EUR1.36 billion, and a net profit between EUR435 million and EUR530 million. The company also projects a net debt of EUR8.2 billion to EUR8.4 billion and a negative free cash flow of EUR490 million to EUR690 million.
InvestingPro Insights
For those closely monitoring Fraport AG's financial health, InvestingPro provides some crucial insights. The company is currently trading at a low earnings multiple, with a P/E ratio of 9.92, which might attract investors looking for undervalued stocks. Additionally, Fraport AG's liquid assets surpass its short-term obligations, suggesting a degree of financial stability in meeting immediate liabilities. Furthermore, analysts have shown confidence in the company's profitability, predicting positive outcomes for this year, as evidenced by the company being profitable over the last twelve months as of Q1 2023.
On the operational front, Fraport AG has shown a strong revenue growth of 20.54% over the last twelve months as of Q1 2023, coupled with an impressive EBITDA growth of 24.98%, reflecting its operational efficiency and potential for further expansion. However, investors should be aware of the recent downward earnings revisions by analysts for the upcoming period, which could signal caution.
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