Lufthansa shares are under pressure in Frankfurt. Citi rates the stock as a ‘sell’

(Il Sole 24 Ore Radiocor) – A tough trading session in Frankfurt for Deutsche Lufthansa , on a day of losses for all European airlines on the stock market. High oil prices (and consequently high fuel costs) are also weighing on Air France-KLM , Wizzair, and IAG. Shares in the automotive sector are also falling. To make matters worse, Lufthansa is also being weighed down by the downgrade to ‘sell’ from ‘neutral’ by analysts at Citi. In a report on the European aviation sector, the analysts highlight that Lufthansa and IAG shares have performed very similarly over the past year, “but the fundamentals of the two companies are heading in different directions”. IAG is trading at lower multiples “despite being a more profitable company, capable of generating greater cash flow and with a lower level of debt”. Conversely, they continue, “we believe that Lufthansa’s current valuation assumes that certain favourable but temporary factors will persist over time, accepts lower profit margins and discounts the end of the risk of further costly strikes”. Citi therefore confirms its ‘buy’ rating on IAG (with an expected total return of 27 per cent), whilst downgrading Lufthansa to ‘sell’, “as the new target price, raised to €8.70, implies a negative expected total return of 12 per cent”.