Post by
lb1temporary on May 08, 2023 8:24pm
Nat bank : Target +3$ at 32$
Increase in 2023 guidance validates our positive view
2023 guidance increased
Air Canada has increased its 2023 EBITDA forecast to $3.5-$4.0 billion from $2.5-$3.0 billion previously, driven by stronger than expected demand and yields as well as lower fuel prices. Our prior 2023 EBITDA forecast as well as the consensus was for EBITDA of $2.8 billion. The mid-point of the new guidance is also higher than the $3.6 billion in EBITDA the company generated in 2019 despite flying only ~90% of 2019 capacity with a workforce that is back to 2019 levels.
Lower fuel helping, but demand is strong
AC is now assuming a fuel price for the year of C$1.09/liter, down from its prior assumption of C$1.30/liter. We note that the new full-year fuel assumption implies a price of ~C$1.00/liter for the remainder of 2023 versus the current spot rate of C$0.85. We estimate that the lower fuel assumption is driving less than 60% of the guidance increase with at least 40% coming from better than forecasted demand and prices.
Costs higher, but should ease
AC is also changing the baseline year for its unit cost (CASM) guidance to 2022 versus 2019. The new 2023 CASM guide implies a ~7% increase versus prior guidance at the low end of the range. While investors have been concerned over higher costs, we stress that higher prices are clearly offsetting these costs. Furthermore, unit costs should trend lower in 2024 as Air Canada brings back capacity to closer to 2019 levels.
Maintain OP; target raised to $32.00
Air Canada's EBITDA in 2023 will be fully recovered to 2019 levels, which is a year ahead of expectations. On our updated 2023 EBITDA forecast (which is at the low end of AC's new guidance range), the stock is trading at only 4.2x EV/EBITDA, which we view as very attractive given the trajectory of the company's earnings recovery, the significant free cash flow expected in the next two years, and material deleveraging we project (net debt-to-EBITDA of 1.6x in 2024 versus 5.7x at the end of 2022). Our new target is $32.00 versus $29.00 previously.
Comment by
Returns2021 on May 08, 2023 8:38pm
They have only missed the target price 2 years in a row LOL. They are not taking the upcoming recession into account at all, delusional. Below $5 it will go.
Comment by
JuIieRichards on May 08, 2023 10:23pm
The only delusional item is the troll who was fired by AC for cause., yeeeeeeeee haaaaaaaw
Comment by
Returns2021 on May 09, 2023 12:16am
This target revision is actually hilarious. They have been dead wrong for 2 years. A major recession is in the works. It will kill travel demand. Use of food banks by employed people has never been higher. It will only get worse as cost of living skyrockets higher. This is a beautiful selling gift. AC is on the journey to below $5
Comment by
AvInvestor on May 09, 2023 11:22am
Hahaha! Travel demand is forecasted to be strong for years to come, Ryanair just purchased hundreds of airplanes in anticipation for the boom! Give it up man, you're in trouble... AC is going to $50!
Comment by
JuIieRichards on May 10, 2023 12:27pm
Hahaha! Travel demand is forecasted to be strong for years to come, Ryanair just purchased hundreds of airplanes in anticipation for the boom! Give it up man, you're in trouble... AC is going to $50!
Comment by
JuIieRichards on May 09, 2023 9:29am
https://stockhouse.com/companies/bullboard/t.ac/air-canada-inc?postid=35437588