On Monday, Citi updated its outlook on Corporacion American Airports SA (NYSE:CAAP), raising the price target to $23.00 from the previous $21.50, while reiterating a Buy rating on the stock. The adjustment comes as a result of revised expectations for the company's future financial performance.
The firm's forecast for the global airport operator now includes an improved projection for long-term operational cash flow and a reduction in net debt. Additionally, the second quarter results of 2024 have been factored into the new model. These changes have led to an increase in Citi's earnings per share (EPS) estimates for Corporacion American Airports from $1.71 to $1.84 for the current year, from $3.22 to $3.31 for the following year, and from $4.17 to $4.29 for the year 2026.
The updated valuation also reflects a change in the weighted average cost of capital (WACC) used in Citi's discounted cash flow (DCF) model for the stock. The WACC has been adjusted from 14.5% to 15.5%, primarily due to considerations for the economic environments in Argentina and Ecuador.
The increase in the price target to $23.00 is a direct consequence of these revised estimates and the new WACC percentage. The analyst's comments highlighted the incorporation of stronger expected long-term operational cash flow and a decrease in sequential net debt as key drivers for the improved outlook on Corporacion American Airports' shares.
In other recent news, Corporación América Airports (CAAP) demonstrated resilience in its Q2 2024 earnings, maintaining stable total revenues despite macroeconomic challenges. The company reported a 9% year-over-year increase in revenues per passenger excluding IFRIC 12, while EBITDA excluding IFRIC 12 saw a 9% decrease. Notably, robust performances in Italy and Uruguay counterbalanced impacts in Argentina and Brazil.
Moreover, CAAP is actively pursuing growth opportunities, including a new capital expenditure plan in Armenia and a master plan for Florence Airport in Italy. Despite a decline in cargo revenues by 13% YoY, aeronautical revenues increased by 3%. However, commercial revenues decreased by 3% YoY, and costs and expenses climbed by 6% YoY.
The company ended the quarter with a liquidity position of $549 million and a net leverage ratio of 1.1 times. Finally, CAAP is negotiating a $400 million CapEx plan with Armenia and seeking approval for a master plan in Italy, marking significant developments in the company's trajectory.
InvestingPro Insights
Following Citi's optimistic revision of Corporacion American Airports SA's (NYSE:CAAP) financial outlook and price target, data from InvestingPro underscores several key metrics that align with the positive sentiment. With a market capitalization of $2.39 billion, CAAP is trading at an attractive earnings multiple with a P/E ratio of 6.66, suggesting that the stock may be undervalued relative to its earnings. This is further supported by the stock's current price being 78.85% of its 52-week high, indicating potential room for growth.
InvestingPro Tips highlight that CAAP's valuation implies a strong free cash flow yield, which aligns with Citi's improved projection for the company's operational cash flow. Moreover, the company's moderate level of debt and its profitability over the last twelve months provide a stable financial footing for potential investors. Analysts predict the company will be profitable this year, which could be a driving factor for the raised price target.
For investors seeking additional insights, there are 9 InvestingPro Tips available, offering a more comprehensive analysis of CAAP's financial health and stock potential. These tips, along with real-time metrics, can be found at https://www.investing.com/pro/CAAP.
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