Scotia's analysis - Nov. 5I almost dont feel like posting this becaseu once aggain, Scotia is so negative towards AC... But I think as investors, we need to know all the information we can to make good decisions.
So here is Scotias analysis as of today, November 5th:
We are raising our TP to $14.50 but remaining neutral on AC.
We have raised our ASM increase estimate in 2016 to 10%. Our capacity estimate is based on AC's fleet plan which calls for 14 more wide-bodies in 2016 (up from
8 in 2015), 10 more RJs, and continued densification of 777s. As well, the conversion of some routes from 767s to 787s will be additive to ASMs.
While AC is doing well on its strategy and Q3 results were strong, fuel played a very large part. We estimate that about 800 bps of margin improvement was due to fuel (net of FX). For 2016, we are giving AC most of the benefit of the doubt
with a fairly significant 3% adjusted CASM decline and only a ~2% fall in RASM
on a stage-length adjusted basis despite the 10% capacity expansion. The street was and is likely to remain above our revised estimates so we think that beats
are less likely especially as the macro environment still remains uncertain.
AC shares are trading at 3.7x EV/2016 EBITDAR which is at a ~1.5 point discount to its US peers and in line with WJA. While AC shares are not expensive vs. history, this is partly due to pressure on sector valuation and the fact that investors are not paying for fuel boosted profits. As well, US airlines have
higher margins, better balance sheets, a healthier macro backdrop and more capacity discipline. As such, we don't see the gap narrowing in the NT especially as PASM ex-fuel is falling.
Q4 estimates:
EBITDA $525 (M)
EPS $0.57
EPS for the year $4.38