International Consolidated Airlines Group (LSE: IAG) shares are currently trading at £1.15, and are down 25% this year. Given the current economic landscape, its stock could be in further trouble, and here’s why.

Excess baggage

From Covid, to inflation, and now airport disruptions, the travel industry can’t seem to catch a break, and this week has been one of the more disruptive ones. Staff shortages, technical difficulties, and rail strikes have served up a perfect dish of chaos for IAG.

On Monday, Heathrow Airport suffered a widespread problem with its baggage system. As a result, Heathrow requested airlines to cancel 10% of their flights from Terminals 2 and 3. Although IAG’s main hub is located at Terminal 5, this still affected the limited number of IAG services at T2 and T3.

To make matters worse, Gatwick Airport capped its daily operations to 825 flights a day in July, and 850 flights a day in August, due to staff shortages. This has led to delays and flight cancellations, with easyJet suffering the brunt of it. Nevertheless, I doubt IAG is spared from this as I’m expecting a number of its services to be impacted as well.

Three strikes and you’re out

Three weeks ago, British Airways check-in staff threatened to strike in July. This is because their pay has yet to return to pre-pandemic levels after salary cuts made during the pandemic. With the deadline fast approaching on 27 June, IAG is stuck between a rock and a hard place.

For one, the board could reinstate workers’ pay, but doing so would impact its already fine margins. To mitigate this, British Airways would have to increase its ticket prices, which might dampen demand and extend its route back to profitability.

On the other hand, not doing anything could be equally devastating. A lack of check-in staff might lead to further delays and cancellations, which wouldn’t be good for IAG shares. Seeing that British Airways is the group’s biggest revenue driver, a strike could impact IAG’s top line quite substantially.

Delayed departure

In its last trading update, IAG mentioned that it expects to achieve operating profitability by Q2. However, this seems to be increasingly unlikely. Apart from potentially having to fork out higher wages or lose millions in revenue, the FTSE 100 firm still has to deal with high oil prices.

Since its Q1 update, jet fuel prices have hit fresh new highs of $175 per barrel, which isn’t going to do its bottom line any favours. Additionally, the Consumer Price Index in May continued to hit 40-year highs at 9.1%. With fears of an impending recession, this is most likely going to dissipate the travel tailwind and send IAG shares even lower.

More importantly, IAG’s balance sheet is in a terrible state. Its debt-to-equity ratio sits at a staggering 2,318%, while its short-term assets can’t cover its short-term liabilities. Not to mention, its last reported free cash flow sits at -€885m. This rings alarm bells of a company that’s in big trouble. Therefore, I won’t be investing in IAG shares. Instead, I’ll be parking my money in other growth stocks that have better financials.

The post Could IAG shares be in further trouble? appeared first on The Twelfth Magpie.

More reading

• Up 47% in a year! Now see what the booming IAG share price could be worth in 12 months
• 2 cheap FTSE 100 stocks that have P/E ratios below 10
• What might Middle Eastern peace mean for the IAG share price?
• Up 119% but with a P/E of just 6.6% – what’s going on with the IAG share price?
• 3 UK stocks to consider snapping up if the stock market crashes this month

John Choong has no position in any of the shares mentioned at the time of writing. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Half-year results

After the release of its HY21 results last Friday, IAG shares saw a 5% fall on the day. The standout figure for half-year was the total revenue, which was down 58% for the period. To add to this, half-year net debt saw a near 25% increase from the same period last year. Although one could have expected such results, with Covid-19 continuing to plague the capabilities of airlines to function at full capacity, investors clearly were not impressed by the results.

With this said, the Q2 2021 results provided some form of optimism. Total revenues were up 77% from Q2 2020, whilst its operating loss for Q2 saw over a 55% fall. Overall losses after tax for the period were also down over 50%. This shows that although Q1 results may have hindered HY figures, as restrictions have lifted during Q2, we have seen an improvement in IAG’s performance. This provides me with optimism for future performance as, if more restrictions ease globally, volumes of passengers should rise. If so, the share price will more than likely follow suit, which means IAG shares at the current price could provide a great opportunity for me.

Looking ahead

Although it may be a while before we see full passenger capacity, the firm is taking steps towards it. The expected passenger capacity for Q3 is 45% of 2019 levels, a healthy increase on the 22% for Q2. This will massively boost revenues. I must note, however, that this is lower than some competitors have set out, highlighted by my fellow Fool G A Chester.

A reduced capacity compared to competitors could be offset by the latest easing of restrictions. I say this because, for British Airways, which is owned by IAG, flights between the UK and US have historically been the most profitable. This means a ramping up of these flights should help recovery. With this said, the US is not yet accepting travellers from the UK or large parts of Europe, which could impact the volume of this flight path.

Is IAG a buy?

There is no doubt in my mind that long term, IAG will recover. Therefore, as a long-term investor, this could be a real opportunity. With the IAG share price currently at a fraction of pre-pandemic levels, I could argue that this is a buy. However, there are a few issues. Most notably, the pandemic will have long-lasting impacts on IAG – a standout being the level of debt it finds itself with. I would like to see how IAG performs for the rest of this year as we hopefully see more flight paths reopen. As such, I intend to keep IAG on my watchlist until then.

The post Should I buy IAG shares at the current price? appeared first on The Twelfth Magpie.

More reading

• Up 47% in a year! Now see what the booming IAG share price could be worth in 12 months
• 2 cheap FTSE 100 stocks that have P/E ratios below 10
• What might Middle Eastern peace mean for the IAG share price?
• Up 119% but with a P/E of just 6.6% – what’s going on with the IAG share price?
• 3 UK stocks to consider snapping up if the stock market crashes this month

Charlie Keough has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Competitors’ results

Industry giant United Airlines announced its 2021 Q1 results on Monday. These were unsatisfactory to say the least, with a net loss of $1.4bn. Operating revenue was also down by 66% compared to 2019, falling to $3.2bn. CEO Scott Kirby explained the pandemic had decreased demand by 80% for United Airlines, which was the primary source of its losses.

This disappointing report seems to have impacted the recent rally of airline share prices, highlighting the profitability problems most firms are still dealing with. Delta Airlines also fell 5% and American Airlines tanked 7% in reaction to the news.

IAG had already shared some disappointing news in late February in its Q4 results. Total revenue was down 69% while gross debt rose from €14.3bn to €15.7bn year-on-year. In addition to this, the total number of passengers carried was down 84%, which highlights the pandemic’s inescapable impact. This was felt most heavily through IAG’s Aer Lingus airline. But it wasn’t all bad news.

A more positive future outlook for the IAG share price?

Due to a massive reduction in flight numbers, IAG was able to trim a healthy 44% of operating costs. This has helped the firm build a stronger liquidity position than before the pandemic. This is great for it going forward as due to debts increasing, it’s essential to be able to counteract these with a stable cash flow position.

The firm also highlighted the positive response to the UK government’s roadmap for exiting pandemic restrictions. IAG’s British Airways saw bookings flourish in the immediate aftermath of the news. The firm won’t operate at full capacity any time in the near future, but the travel sector is likely to boom in the next year and beyond. People have been stuck in their homes and want to travel freely again. This is likely to benefit the IAG share price for years to come.

The IAG price-to-sales (P/S) ratio is 0.98. For comparison, competitors Delta Airlines and Southwest Airlines have P/S ratios of 2.2 and 3.91 respectively. A lower P/S ratio tends to indicate that a stock may be undervalued in comparison to its competitors. This metric points me towards buying the stock at the current share price.

My Verdict

It’s clear the airline industry has faced some turbulence. I believe the United Airlines results scared airline investors into dumping some of their shares in the wider sector. The results also highlighted that firms are still struggling and will continue to struggle with the impacts of the pandemic, even though normality may seem close. However, I would use this opportunity to grab some cheap shares for my portfolio, as I’m bullish about the travel industry’s long-term future.

The post The IAG share price fell 8% yesterday. Here’s why appeared first on The Twelfth Magpie.

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Dylan Hood owns shares in Southwest Airlines. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Dividend cover — how many times a company’s payout is covered by its earnings — is a measure of dividend safety. Cover of two times or more is generally considered robust.

I’ve hunted through the FTSE 100 for firms with super-strong cover, and found six with cover of over three times. On this measure, they’re the Footsie’s safest dividend stocks. Let’s take a look at them.

As you can see, there’s quite a mix in terms of price-to-earnings (P/E) valuations and dividend yields.

Low yielders

Athleisure retailer JD Sports has the lowest yield at 0.3% and extraordinary dividend cover of 17.7 times. This is because management is using the vast majority of earnings to pursue exciting international expansion in the US, Europe and Asia.

Clearly, this is not a stock for investors seeking an immediate high income. However, I’d happily buy it today for its huge growth opportunity, sector-leading cash generation, and future income potential.

Growth is also currently the primary attraction of fellow sub-1% yielders NMC and Halma. The former is a private healthcare group based in the United Arab Emirates. I took an in-depth look at the stock last month, and continue to rate it a ‘buy’ today. Meanwhile, health and safety products specialist Halma is another company I like, and have tipped in the past. However, I think its current P/E is a little too rich, so I see this one as a ‘hold’.

Surfin’ USA

Equipment rental group Ashtead has ridden the US wave of Trumpian tax cuts and infrastructure spending by expanding aggressively in North America. It’s made dozens of acquisitions and added hundreds of stores.

I’m generally a bit wary of companies that go on massive acquisition sprees, particularly during boom times. The US economy is now in its longest period of expansion on record, and there are indicators it may be coming to an end. With Ashtead’s business being highly geared to the economic cycle, I’m inclined to avoid it at this stage.

High-yield bargain?

Finally, international investment group 3i and British Airways owner International Consolidated Airlines (IAG) both trade on sub-10 P/Es and offer dividend yields of 3.2% and 6.3% respectively. As far as 3i is concerned, I agree with my colleague Vishesh Raisinghani’s positive analysis of the company. Which leaves the question of whether I think IAG is a bona fide high-yield bargain.

IAG’s shares have lost over a third of their value since this time last year. However, it’s a sector-wide phenomenon, with other carriers having been similarly shunned by the market.

This cyclical industry is in a phase of overcapacity, and companies’ margins are past their cyclical peak. The market appears to be pricing-in harder times ahead and a round of survival of the fittest.

Personally, I think IAG has decent strategic and financial strength, and that the current valuation offers a reasonable margin of safety. In a really extreme downturn, the dividend may not be as secure as the high level of cover suggests, but the risk/reward balance makes the stock a ‘buy’ in my book.

The post The 6 safest dividend stocks in the FTSE 100 – would I buy? appeared first on The Twelfth Magpie.

More reading

• Up 47% in a year! Now see what the booming IAG share price could be worth in 12 months
• 2 cheap FTSE 100 stocks that have P/E ratios below 10
• What might Middle Eastern peace mean for the IAG share price?
• Up 119% but with a P/E of just 6.6% – what’s going on with the IAG share price?
• 3 UK stocks to consider snapping up if the stock market crashes this month

G A Chester has no position in any of the shares mentioned. The Motley Fool UK has recommended Halma and NMC Health. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Thankfully, there are still some attractive dividend stocks available if you’re willing to look hard enough. Indeed, here are two FTSE 100 names which I believe have the hallmarks for value and income.

Utilities

First up is ‘Big Six’ energy company SSE (LSE: SSE). With the company trading at just 11.4 times forward earnings, and the shares offering a prospective dividend yield of 7.2%, it certainly looks to offer both value and income.

That doesn’t seem too surprising as investing in utility stocks has long been a go-to option for income investors. As utilities tend to earn steady revenues, they have historically paid reliable dividends to shareholders with relatively low volatility and moderate risk.

However, SSE is particularly attractive because there are a number of bullish catalysts that could come through for the company this year. Most notably, SSE is looking to merge its retail supply business with Npower to create a separately-listed energy company. The merger could generate some significant cost savings for the combined company, allowing it to better compete against rivals.

It would also allow SSE to focus on its power generation and regulated networks businesses, which could lead to a re-rating in the remaining group’s valuation, unlocking value for shareholders.

Challenging markets

Although SSE is operating in challenging market conditions, with growing regulatory and political uncertainty, dividends have continued to grow in line with expectations, with a 3.6% increase in its interim dividend to 28.4p. Looking ahead, the company is targeting full-year dividend growth of at least equal to RPI inflation.

The dividend policy also seems sustainable to me with the company working to keep dividend cover within the expected range of around 1.2-1.4 times, although in the short term, it will likely fall towards the bottom of this range.

Cyclicals

Investors should also look outside of defensive sectors when searching for reasonably priced dividend stocks. On the whole, cyclical sectors are a lot cheaper than defensive sectors, with many banks, housebuilders and airlines offering yields in excess of 3%.

British Airways-owner IAG (LSE: IAG) is one stock which seems to fit the bill. The stock trades at a mere 6.9 times expected earnings this year and offers a prospective dividend yield of 3.7%.

Sure, the airline industry is highly cyclical and airline companies haven’t historically been the most reliable dividend payers. But now riding on a tide of higher fares and strong global economic growth, airlines are piling up profits and returning more cash to shareholders.

Looking forward, it will be interesting to see if they can ride this momentum into 2018. So far things have gone well though, as earlier this week IAG reported group traffic in December increased by 6.1% year-on-year, after growth of 7.6% and 4.4% growth in November and October.

This will likely translate into meaningful bottom-line improvement, with City analysts expecting group underlying earnings to have grown by 5% in 2017. As such, IAG’s dividend prospects are backed by a promising earnings outlook and robust dividend cover.

The post Looking for value and income? I’d consider these FTSE 100 stocks appeared first on The Twelfth Magpie.

More reading

• Up 47% in a year! Now see what the booming IAG share price could be worth in 12 months
• How UK shares could build a £339,849 ISA
• 2 cheap FTSE 100 stocks that have P/E ratios below 10
• What might Middle Eastern peace mean for the IAG share price?
• Up 119% but with a P/E of just 6.6% – what’s going on with the IAG share price?

Jack Tang has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Cheaper fuel

Operating profit before exceptional items for the six months to 30 June rose by 37% to €975m, on the back of cheaper fuel and strong passenger demand in the second quarter of 2017. Passenger unit revenue, a key measure of performance in the industry, increased by 1.5% in Q2, the first quarterly gain in almost three years. The company said it expects a double-digit percentage improvement in operating profit for the full year.

These figures were achieved in spite of the IT failure at British Airways in May, which cost the company €65m in additional compensation fees and baggage claims, and a €44m hit from adverse foreign exchange movements that was mainly down to sterling’s recent weakness.

Looking ahead though, I’m concerned about growing capacity in the short-haul market. Just this week, Ryanair and easyJet both warned of the risk of a late-summer price war among European budget carriers. Although IAG is somewhat protected by its greater focus on long-haul, the airline is hardly immune to market forces.

Still, IAG seems attractively valued, with shares trading at a forward price-to-earnings ratio of just 6.9, based on analysts’ 2017 forecasts. As such, now may be a great time for value investors to consider the airline group.

Earnings beat

Elsewhere, shares in specialist engineering group IMI (LSE: IMI) fell by as much as 4% on Friday after the company announced its interim results.

Although statutory pre-tax profits jumped by 26% to £89m in the six months to 30 June, beating analysts’ estimates, CEO Mark Selway warned about challenging market conditions ahead.

“In the remainder of the year, organic revenue is still expected to be below last year, principally driven by order phasing in Critical Engineering. However, second half margins will show a modest improvement compared with the same period in 2016, supported by both rationalisation savings and improved market conditions in Precision Engineering. Based on current market conditions, we expect full-year 2017 results will be modestly above current market expectations,” he said in today’s announcement.

Revenue was also 11% higher at £848m, while adjusted earnings per share rose by 16% to 28.4p, as its first-half figures were given a big boost by the sterling’s weakness. Excluding currency effects, IMI’s revenue in the first half would have been broadly flat — although that would still have been better-than-expected given the slowdown in capital spending in the energy sector, which has affected sales of its fluid control systems.

Reassuringly though, IMI raised its interim dividend by 1.4% to 14.2p, which indicates management’s confidence in future earnings. The shares currently yield 3%, with a payout ratio of less than two-thirds of earnings.

The post Why I’d still buy International Consolidated Airlns Grp SA after results appeared first on The Twelfth Magpie.

More reading

• Up 47% in a year! Now see what the booming IAG share price could be worth in 12 months
• 2 cheap FTSE 100 stocks that have P/E ratios below 10
• What might Middle Eastern peace mean for the IAG share price?
• Up 119% but with a P/E of just 6.6% – what’s going on with the IAG share price?
• 3 UK stocks to consider snapping up if the stock market crashes this month

Jack Tang has no position in any shares mentioned. The Motley Fool UK has recommended IMI. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More traffic

Only last week, the group which also owns airlines Iberia and Vueling, as well as Irish flag carrier Aer Lingus posted some very encouraging traffic statistics for the month of June. Group traffic as measured in revenue passenger kilometres, increased by 3.9% to 22,878, compared to 22,021 a year ago, with overall capacity measured in available seat kilometres rising by 3.5% to 27,127.

Meanwhile, the passenger load factor, which measures how full flights are, edged higher from 84% to 84.3% for the month of June, helping to raise the overall load factor from 80% to 80.9% for the first half of the year. The total number of passengers carried last month climbed to 9,752, a 3.2% improvement from 2016, bringing the total number of passengers to 48,806 so far in 2017, 4.6% higher than the same period a year ago.

Brexit

The airline industry and the travel industry as a whole have been facing challenging times of late, with political and economic uncertainty, Brexit, and the subsequent volatility in the currency markets weighing heavily on many London-listed carriers. But International Consolidated Airlines has responded well, with cost-cutting and structural changes helping the group to increase profitability despite the recent challenges facing the industry.

This outperformance hasn’t gone unnoticed by the market, with the share price being propelled to 637.5p – the highest since 1998. But I believe the shares still offer good value for bargain hunters, with the P/E ratio at a lowly 7.4 for the current year to December, and falling to just 6.9 for 2018.

Housing shortage

Meanwhile, another London-listed firm easily outperforming the market over the past year is Redrow (LSE: RDW). The Flintshire-based housebuilder has seen its share price rise by no less than 80% over the past year and surpass the previous all-time high of 548p over a decade ago.

The FTSE 250-listed developer may be trading at record highs, but in my view the share price still has further to go. Don’t get me wrong, I’m not denying that recent political and economic turmoil brought about by Brexit will weigh heavily on the minds of potential investors. But I believe the continuing housing shortage will mean that housebuilders such as Redrow will see a steady increase in demand over the coming years, albeit at a slower pace.

And with analysts’ consensus estimates suggesting an 8% increase in underlying earnings over the next couple of years, I believe the firm still offers excellent value trading at a very appealing multiple of just eight times forecast earnings.

The post 2 great value stocks for successful investors appeared first on The Twelfth Magpie.

More reading

• Up 47% in a year! Now see what the booming IAG share price could be worth in 12 months
• 2 cheap FTSE 100 stocks that have P/E ratios below 10
• What might Middle Eastern peace mean for the IAG share price?
• Up 119% but with a P/E of just 6.6% – what’s going on with the IAG share price?
• 3 UK stocks to consider snapping up if the stock market crashes this month

Bilaal Mohamed has no position in any shares mentioned. The Motley Fool UK has recommended Redrow. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The British Airways and Iberia owner announced that operating profit hit €170m during January-March, up 9.7% year-on-year. This was despite revenues dipping 2.8% during the three months to €4.9bn as currency pressures and the later Easter holiday weighed.

Lauding the results, chief executive Willie Walsh commented that “this is a record performance in Q1, traditionally our weakest quarter, with the improving trend in passenger unit revenue continuing.”

Walsh also took time to applaud the popularity of its recently-launched LEVEL budget airline brand, commenting that “it’s already been extremely successful with sales running well ahead of expectations.”

LEVEL is due to begin running flights from Barcelona to Los Angeles, San Francisco, Punta Cana and Buenos Aires from June, and has been identified as a future earnings driver for IAG.

Furthermore, the company’s bubbly first-quarter performance prompted it to affirm expectations that operating profit will grow again in 2017.

Plane brilliance

Today’s share price spurt leaves IAG dealing at levels not seen since December 2015, but I believe the company still offers plenty of upside as conditions in the airline industry steadily improve.

Indeed, IAG said today that the group expects Q2 passenger unit revenue to show an increase versus last year, at constant currency. If realised this would mark the first year-on-year improvement for three years.

IAG has remained resilient despite predictions of collapsing air traffic following June’s EU referendum, and is well placed to benefit from improving trading conditions seen more recently. Not only is the business a big-player in transatlantic travel, but its rising presence in the low-cost segment — both long- and short-haul — also promises plenty of revenues opportunity.

Given this promising outlook, the City expects IAG to lift last year’s 23.5 euro-cent-per-share dividend to 24.4 cents in the present year, and again to 26.5 cents in 2018.

These figures yield a chunky 3.7% and 4% respectively, and I expect rewards to keep heading higher as revenues improve.

Patchy prospects

I am less than enthused by the investment outlook of Hammerson (LSE: HMSO), however, even though the property developer is also expected to shell out generous medium-term dividends.

In 2017 the company is predicted to pay a 25.4p per share dividend, up from 24p last year and yielding 4.3%. And for 2018 the yield steps to 4.6% thanks to predictions of a 26.8p payment.

However, the uncertainties facing the UK retail sector in the near term and beyond cause me great concern for Hammerson’s profit prospects, and with it the promise of abundant dividends.

Not only could rising inflation and dipping consumer confidence cause retailers to reassess their expansion programmes should profits slump, but the structural shift in the shopping sector from bricks-and-mortar stores to online also casts doubts over demand for the company’s properties in the years ahead.

I reckon there are far less-risky dividend stocks out there right now.

The post Are these two of the FTSE 100’s best dividend stocks? appeared first on The Twelfth Magpie.

More reading

• Up 47% in a year! Now see what the booming IAG share price could be worth in 12 months
• 2 cheap FTSE 100 stocks that have P/E ratios below 10
• What might Middle Eastern peace mean for the IAG share price?
• Up 119% but with a P/E of just 6.6% – what’s going on with the IAG share price?
• 3 UK stocks to consider snapping up if the stock market crashes this month

Royston Wild has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Bank those profits?

With the shares changing hands at 530p earlier today, they’re certainly more popular than they were at 392p back in September. Those that took my advice will be sitting on healthy gains in the region of 35%. Sometimes it pays to be contrarian. So what now? Is it time to bank those paper profits and move on, or perhaps be greedy and hold on in the hope of further gains?

Well, the uncertainties around Brexit certainly haven’t put IAG’s expansion plans on hold. Earlier this month the group, which also owns Spanish airlines Iberia and Vueling, as well as Irish flag carrier Aer Lingus, decided that wasn’t enough to be getting on with, and announced the launch of a new low-cost long-haul airline based in Barcelona.

Hop on board

The new airline, curiously-named Level, will initially be operated by Iberia’s flight and cabin crew and will fly to Los Angeles, San Francisco, Buenos Aires and Punta Cana in the Dominican Republic. As the group’s fifth main airline, Level may eventually fly from other European destinations other than Barcelona.

To me that doesn’t sound like an airline that’s too worried about the strength of the UK economy, Brexit or the sinking pound. It sounds like an airline that’s shrugging off the uncertainties and confidently pressing ahead with its expansion plans. And why not? The latest set of traffic statistics showed a 2.9% increase in group traffic for the month of February, with capacity edging 2.2% higher.

Personally I think the shares still offer great value for investors. With our friends in the Square Mile expecting the group’s revenues to rise to €22.6bn this year and pre-tax profits closing in on €2.4bn, an earnings multiple of just seven seems far too cheap. In my opinion it’s still not too late for investors to hop on board International Consolidated Airlines.

Meet the Fokkers

Another FTSE 100 stalwart that looked undervalued to me back in September is GKN (LSE: GKN). The Redditch-based global engineering group has also outperformed over the last six months, gaining 12% since my last recommendation. With the share price now at two-year highs is it time to cut and run?

2016 was another successful year for the group, with sales up 22% and a strong performance from Dutch aerospace business Fokker Technologies in its first full year of ownership.

With military sales expected to improve this year and a strong commercial order book, I remain bullish on the group’s prospects for growth. Despite a 30% share price rise over the past year I think GKN is still a little undervalued at 11 times forward earnings.

The post These FTSE 100 stocks are trading at bargain levels appeared first on The Twelfth Magpie.

More reading

• Up 47% in a year! Now see what the booming IAG share price could be worth in 12 months
• 2 cheap FTSE 100 stocks that have P/E ratios below 10
• What might Middle Eastern peace mean for the IAG share price?
• Up 119% but with a P/E of just 6.6% – what’s going on with the IAG share price?
• 3 UK stocks to consider snapping up if the stock market crashes this month

Bilaal Mohamed has no position in any shares mentioned. The Motley Fool UK owns shares of GKN. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

The advertising giant has a rich record of generating resplendent earnings growth year after year. The breadth of its operations in the communications and advertising sectors — allied with its massive worldwide footprint — allows it to navigate weakness in one or two markets and keep delivering stunning top-line growth.

And WPP’s remains extremely active on the M&A front to keep creating sales growth. Just this month the business snapped up Texas-based SubVRsive, a specialist in the potentially-explosive virtual reality segment, and also picked up as advertising services play Zubi, which caters to the Hispanic market in the US.

WPP has also made acquisitions in Ireland, India, China and Brazil since the turn of the year alone, and the strength of its balance sheet should keep the acquisitions rolling in.

The City expects these factors to keep generating solid earnings growth, and has pencilled-in rises of 15% and 9% in 2017 and 2018 respectively. These projections result in very reasonable P/E ratios of 14.5 times and 13.3 times.

WPP’s impressive profits history has also made it one of the hottest growth dividend bets out there too. The business lifted payouts at a compound annual growth rate of 11.9% between 2012 and 2016, and the City expects shareholder rewards to keep tearing higher.

Indeed, a predicted 55.4p per share dividend for 2016 is anticipated to rise to 63.5p in the current year, creating a chunky 3.4% yield. And this figure jumps to 3.8% for 2018 thanks to an estimated 69.7p dividend.

Make soaring returns

I also reckon International Consolidated Airlines Group (LSE: IAG) is a terrific selection for share pickers to buy and hang onto.

A flurry of factors have made investment in the airlines industry somewhat unfashionable in recent times, from fears over shrinking traveller wallets and rising terrorism on holiday demand, through to concerns over rising fuel costs.

But in the long run I reckon IAG has what it takes to navigate these near-term problems and deliver exceptional rewards in the coming years. Ongoing cost-cutting across the group should help it to navigate any near-term revenues problems and set it up as an efficient, earnings-generating machine in the future.

And the company’s blue-riband airlines like British Airways should benefit from the steady rise in transatlantic traffic, while rising investment in Aer Lingus and Vueling sets it up nicely to enjoy booming growth in the budget segment.

The number crunchers expect IAG to print a fractional earnings rise in 2017 before picking up the pace again from next year — a 5% rise is currently anticipated for 2018. And these figures create ultra-low P/E ratios of 6.7 times and 6.3 times respectively.

Furthermore, IAG is also a lucrative stock in the dividend stakes, with expected payments of 22.7 euro cents per share this year and 24.2 cents in 2018, yielding 4.1% and 4.4%.

The post These FTSE 100 stocks could help you retire early appeared first on The Twelfth Magpie.

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Royston Wild has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.