Jefferies has revised the earnings estimates for Japanese airlines due to increased tensions in Iran and heightened fuel prices, according to a recent research note.
The equity research firm expects margin pressure to arise in fiscal 2027 despite strong demand, before recovering in fiscal 2028.
Japan Airlines (TYO:9201) has increased its fiscal 2026 EBIT guidance to 205 billion yen due to maintained international demand and steady domestic trends.
Jefferies has set an EBIT forecast of 201 billion yen for the airline in fiscal 2026, although the fiscal 2027 forecast is lower at 170.3 billion yen amid the full-year effect of the fuel subsidy expiration and increased unit costs.
For ANA Holdings (TYO:9202), the research firm expects 198.2 billion yen in operating profit for fiscal 2026, compared to the company's 200 billion yen guidance.
Jefferies sees upside risk to fuel costs into fiscal 2027 compared to pre-conflict levels, given pending negotiations between the US and Iran and heightened insurance and operational risks.
The research firm adjusted Japan Airlines' price target to 3,600 yen from 4,000 yen, considering greater macroeconomic risk, fuel price movements, and earnings normalization for fiscal 2027.
The company retained a buy recommendation due to a clear recovery trajectory into fiscal 2028.
Meanwhile, ANA's price target was revised to 3,200 yen from 3,300 yen while it was maintained at hold due to limited earnings visibility and continued yield pressure.
Jefferies prefers Japan Airlines from its peers in terms of having better recovery after geopolitical and fuel headwinds ease.
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