The IAG share price sank by over 8% today, Nov. 7, as the company published its financial results for the third quarter. It plunged to a low of 373p, down sharply from the year-to-date high of 428p.
IAG share price crashes amid weak US demand
IAG, the parent company of companies like British Airways and Aer Lingus, came under intense pressure as the company published its financial results, which were largely weaker than expected.
The top-line numbers showed that its revenue rose by 2% in the third quarter to €2.053 billion, while its profit dropped by 2.3% to €1.4 billion.
In a statement, the management noted that its cargo revenue dropped by 6.9% in the third quarter, while passenger unit moved downwards by 2.4%.
Its nine-month revenue rose by 4.9% to €25.23 billion, while the operating profit was up by 18.3% to €3.9 billion.
The main reason why the IAG share price crashed is that its crucial North American business continued to struggle in the last quarter. This trend may continue now that the US is in the longest government shutdown ever. In a statement, the management said:
“As expected the North Atlantic market saw some softness in US point-of-sale economy leisure and unit prices across our airlines were lower in the European market due to a combination of high growth by British Airways and more competitive markets elsewhere.”
On the positive side, the challenges in North America may turn out to be temporary, which will help it to resume its growth in the coming months.
The company has also continued to improve its balance sheet, helped by its strong free cash flow and a recently issued five-year €500 million unsecured bond with an interest of 3.35%. It now has a net leverage of 0.8x, better than 1x in the same period last year.
Additionally, the company has continued to return cash to investors through dividends and share buybacks. It increased its dividend to €0.048, and now expects to pay more money than the €427 million it paid last year.
The company has also repurchased shares worth €950 million of the planned €1 billion, and it plans to announce another package in February when it publishes its financial results.
IAG stock price technical analysis
The weekly timeframe chart shows that the IAG stock price has done well in the past few years. It has jumped from the pandemic low of 88p to a high of 425p this year.
This recovery happened as the company returned to growth and sorted out its debt issues. The surge has coincided with that of other global airline groups like Delta, United, and Lufthansa.
The rebound also coincided with the restart of dividends and share repurchases program that has boosted its shareholder returns.
Most recently, the stock jumped from the April low of 207p to 425p as concerns about Donald Trump’s tariffs eased.
The stock now remains above the 50-week and 100-week Exponential Moving Averages (EMA), a sign that bulls are in control. However, it has now formed a bearish engulfing pattern, which often leads to more downside.
Therefore, the most likely scenario is where the IAG stock price drops to 360p, and then resumes the uptrend. This initial target is important as it was the highest point in February this year. As such, it is now forming a break-and-retest pattern, which will lead to more upside in the near term.
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