LHA GR

Deutsche Lufthansa AG

Industrial/Transportation


Presented:08/15/2016
Price:€10.47
Cap:$5.42B
Current Price:€6.68
Cap:$8.92B

Presented

Date08/15/2016
Price€10.47
Market Cap$5.42B
Ent Value$7.90B
P/E Ratio4.14x
Book Value€7.63
Div Yield0.01%
Shares O/S464.89M
Ave Daily Vol5,122,666
Short IntN/A

Current

Price€6.68
Market Cap$8.92B
Deutsche Lufthansa AG provides passenger, freight and cargo airline services. It operates through four business segments: Passenger Airline Group, Logistics, Maintenance, Repair and Overhaul (MRO) and Catering. The Passenger Airline Group segment offers passenger services. The Logistics segment provides a range of freight transport services for various cargos, including live animals, valuable cargo, mail, dangerous goods, and temperature-sensitive goods; and road feeder services. The Maintenance, Repair, Overhaul segment focuses on maintenance, repair, overhaul, modification and conversion, and engines and components for passenger aircraft. The Catering segment provides airline catering, and related upstream and downstream in-flight services; in-flight equipment and logistics services; management of onboard service; and in-flight retail. The company was founded on January 6, 1926 and is headquartered in Cologne, Germany.

Publicly traded companies mentioned herein: Air France-KLM (AF FP), Deutsche Lufthansa AG (LHA GR), easyJet PLC (EZJ LN), Ryanair Holdings PLC (RYA LN)

Highlights

The presenter is short shares of Deutsche Lufthansa (LHA) for three main reasons: the legacy European airline continues to be vulnerable to long-haul competition; low-cost carriers in Europe are aggressively moving into the German market; and fuel hedges are an incremental headwind to earnings. In addition, LHA cannot seem to avoid trouble with its labor unions, continues to struggle with its pension, and Street earnings forecasts for 2017 are overly optimistic (at ~€2.30/ share). If the current market multiple framework holds and his more bearish €1.50 2017 EPS estimate is accurate, LHA shares could decline to the mid single digits from the €10 - €11 range over the next 12 months.

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