Air Canada T.AC

Alternate Symbol(s): ACDVF

Industrials Airlines

Air Canada is an airline company. The Company is a provider of scheduled passenger services in the Canadian market, the Canada-United States (U.S.) transborder market and the international market to and from Canada. It provides scheduled service directly to more than 180 airports in Canada, the United States and internationally on six continents. The Company’s Aeroplan program is Canada's premier travel loyalty program, where members can earn or redeem points on the airline partner network of 45 airlines, plus through a range of merchandise, hotel and car rental rewards. Its freight division, Air Canada Cargo, provides air freight lift and connectivity to hundreds of destinations across six continents using its passenger and freighter aircraft. Its Air Canada Vacations is a tour operator, which is engaged in developing, marketing, and distributing vacation travel packages in the outbound/inbound leisure travel market. Air Canada Rouge is Air Canada's leisure carrier.

TSX:AC - Post by User

Air Canada > TD: Maintain at 25$

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Comment by Returns2021on Oct 31, 2022 2:19pm

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Post# 35060774

RE:TD: Maintain at 25$

$5 will happen.

lb1temporary wrote: Q3/22; Demand Provides Pricing Power to Offset Cost Inflation

Event Air Canada reported Q3/22 EBITDA of $1.057 billion vs. TD/consensus (excluding outliers) at $903 million/$841 million.

Impact: SLIGHTLY POSITIVE

We are maintaining our $25.00 target price and BUY recommendation. Our unchanged target price reflects the net impact of slightly lower valuation-period adjusted EPS, offset by one less quarter of discounting our year-end 2024 equity value. Lower valuation-period forecast EPS is primarily due to higher fuel price assumptions and the impact of currency and higher capital expenditures on debt and interest expense. Air Canada reported strong Q3/22 results, with revenue, EBITDA, and FCF stronger than expected, and an outlook that shows no signs of weakness related to growing economic headwinds. We believe that strong demand continues to provide

Air Canada with the pricing power necessary to offset cost increases resulting from operational challenges and inflation. Our conviction in the trajectory of air-travel demand over the short-to-medium term is relatively low due to a lack of historical precedents for the cross-currents of pent-up demand and economic headwinds. Although we believe that pricing power will moderate in 2023, we believe that strong revenue growth and margin expansion will still occur based on the extremely depressed results that were being generated by Air Canada in Q1/22 and Q2/22 as a result of pandemic-related travel restrictions.

In the short term, we believe that equity market sentiment regarding the downside risk related to the broader economy will play an outsized role in determining Air Canada's share-price direction. We believe that investors should continue to anticipate shareprice volatility, but focus on the company's strong financial position, ability to generate relatively strong revenue and earnings growth in 2023 relative to other industrial sectors, and valuation when considering 2024 and 2025 earnings power.

TD Investment Conclusion

Air Canada is trading at an attractive valuation, when considering its earnings potential in 2024 and beyond. Based on our current assumptions, we believe that Air Canada's aircraft deliveries, capacity plans, and pricing power will allow it to navigate short-term headwinds and reward investors who ride out the current volatility.