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Why British Airways Owner (IAG) Shares Fell on Upbeat Q3 Results

Simon Mugo trader
Updated 28 Oct 2022

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Key points:

  • IAG shares fell despite the airline group reporting excellent Q3 results.
  • Investors muted reaction was driven by negative market sentiment.
  • However, the airline group’s revenues have recovered to 2019 levels.

The International Consolidated Airlines Grp SA (LON: IAG) shares barely moved despite the airline group announcing positive results for the third quarter. The group generated revenues worth €7,329 million, which was a 0.9% improvement to the Q3 2019 revenues.

Investors barely reacted to the excellent results as the airline group reported operational profits of €1,208 million compared to the €452 million loss recorded in Q3 2021. Moreover, the group’s operating profits for the nine months to September rose to €770 million compared to the €2,487 million loss recorded in a similar period last year.

Also read: The Best Airline Stocks To Buy Now.

IAG shares were trading lower for the day as investors largely expected positive results from the airline group. However, the lacklustre reaction from investors shows that many are not as optimistic about the company’s future performance despite its impressive results over the past month.

The negative sentiment towards the airline stock is part of the broader market sentiment as investors remain bearish about the UK, European and global economy in the last quarter of the year as many expect a global recession.

Fears of a pending recession have soured investor sentiment as leading central banks continue hiking rates to curb inflation despite the rising cost of living witnessed in the UK and other European countries due to the Russia-Ukraine war.

The markets are also worried about the upcoming winter season that will likely see most European countries struggle to meet their energy needs amid the planned cutoff of Russian energy supplies to the region scheduled for December. All these factors have contributed to today’s muted reaction to IAG’s excellent Q3 results.

Luis Gallego, IAG’s CEO, said: “We achieved another strong performance in the third quarter, with an operating profit of €1.2 billion and liquidity of over €13 billion. All our airlines were significantly profitable, and we are continuing to see strong passenger demand while capacity and load factors recover. Leisure demand is particularly healthy, and leisure revenue has recovered to pre-pandemic levels. Business travel continues to recover steadily.

So, would I buy IAG shares? The short answer is no. The shares are trading in the middle of a wide range. I would wait for a drop to the bottom of the range or a breakout above the top of the range.

*This is not investment advice.

IAG share price.

IAG share price 28-10-2022
Source: IG

The IAG share price edged lower despite the group releasing upbeat Q3 results.

Simon has over six years of professional trading experience across FX, commodities and equities. He has a strong passion for financial markets and is particularly focused on price action trading