We recently compiled a list of the 10 Best Airport Stocks To Buy. In this article, we are going to take a look at where Corporación América Airports SA (NYSE:CAAP) stands against the other airport stocks.
Passenger Traffic Rebound: Airport Industry Poised for Growth
The airport industry plays a crucial role in facilitating global connectivity, enabling the movement of people and goods across borders. The performance of the airport sector can significantly influence economic growth and development worldwide.
Passenger traffic in the global air travel industry is experiencing a strong rebound as it recovers from the impact of COVID-19. According to Airports Council International (ACI), global passenger volume is projected to reach approximately 8.7 billion in 2023, which is 95% of the pre-pandemic levels seen in 2019. This represents a significant year-over-year growth of 31% from 2022 levels. Looking ahead, 2024 is expected to be a landmark year, with passenger numbers predicted to surpass 2019 levels for the first time since COVID-19, reaching around 9.7 billion passengers, or 106% of the 2019 volume. This represents a 12% year-over-year growth from 2023 levels.
The long-term outlook for the airport and air travel industry is also promising, with total passenger traffic expected to grow at a compound annual growth rate (CAGR) of 4.3% from 2023 to 2042. ACI forecasts indicate that by 2042, global passenger traffic could nearly double the 2024 projection, reaching close to 20 billion passengers.
However, factors such as high global inflation, slowdown of global GDP, extreme weather events, and geopolitical conflicts could introduce substantial risks and uncertainties in future forecasts.
Prioritizing Sustainable Growth and Efficiency
As the airport industry expands, sustainability and efficiency have become key focuses. Airports are implementing energy-efficient lighting and exploring the use of sustainable fuels to lessen their environmental impact.
London Heathrow Airport, one of the busiest airports in the world, is among the airports that are committed to sustainability. Since 2017, the airport has been sourcing 100% renewable electricity to power its terminals. As part of its sustainability strategy, the airport aims to cut carbon emissions on the ground by at least 45% by 2030 compared to 2019 levels. This includes enabling passengers to access the airport sustainably, transitioning to zero-carbon vehicles, and investing in efficient infrastructure.
Airports are committed to optimizing operations and enhancing the passenger experience, while also making significant investments in infrastructure upgrades to support future growth.
On August 30, Bloomberg reported that Schiphol Group NV, the owner of Amsterdam Airport, has announced a significant investment of EUR 6 billion ($6.7 billion) over the next five years to upgrade the airport’s infrastructure. This investment is the largest in the airport’s history and it will focus on renewing essential systems such as baggage handling, climate-control systems, escalators, and taxiways. The airport is also seeing a recovery in passenger traffic, with expectations of welcoming between 65 million and 68 million travelers in 2024.
The airport industry remains resilient and focused on delivering a seamless and sustainable travel experience for passengers. With continued investment and innovation, the sector is well-positioned for long-term growth and success. Now that we have discussed some of the key trends in the global airport industry, let’s take a look at the 10 best airport stocks to buy.
Methodology
To compile our list of the best airport stocks to buy, we first consulted stock screeners from Finviz and Yahoo Finance, along with online rankings, to create an initial list of the largest publicly traded airport companies. From this list, we selected the stocks that analysts believe have the most potential for growth. We ranked the best airport stocks to buy based on their average price target upside potential according to analysts, as of September 11, 2024.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
An airline passenger going through the security process at an airport managed by the company.
Corporación América Airports SA (NYSE:CAAP)
Average Price Target Upside Potential According to Analysts: 38.08%
Average Share Price Target Projected by Analysts: $21.90
Corporación América Airports SA (NYSE:CAAP) is one of the world’s biggest airport operators, currently operating 52 airports across Latin America and Europe. The corporation acquires, develops, and operates airport concessions, serving millions of customers each year. Corporación América Airports SA’s (NYSE:CAAP) generates revenue through aeronautical and commercial services. The majority of income comes from fees charged to departing passengers, as well as landing and parking fees for aircraft operators using the airport facilities. Additionally, the company generates revenue through commercial services, which include duty-free shops, retail and food outlets, advertising, and parking fees. This diversified revenue model allows the company to benefit from both passenger spending and operational fees from airlines.
In the first quarter of 2024, the company secured a 10-year extension for its Punta del Este international airport concession in Uruguay, demonstrating its ability to maintain and expand its operations. Additionally, CAAP received a favorable $91 million arbitration award related to the Chinchero International Airport project in Peru, where the company owns a 50% stake. The company is actively engaged in negotiations to expand airports in Yerevan and Florence, while also evaluating new projects in various regions to grow its global airport portfolio.
Corporación América Airports SA (NYSE:CAAP) is making strategic moves to drive future growth, positioning it as an attractive investment opportunity. However, the company’s financial performance in Q2 2024 experienced a downturn compared to the same period last year. Total revenues for the quarter reached $416.2 million, down from $422.7 million recorded in Q2 2023, reflecting a 1.5% year-over-year drop. This decline was influenced by a 7.8% year-over-year decline in total passenger traffic, which fell to 18.2 million from 19.7 million in the same quarter last year. Operating income also saw a decline, dropping to $92.9 million in Q2 2024 from $110.4 million in Q2 2023. Despite these setbacks, the company maintained a solid cash position, with cash and cash equivalents totaling $439.4 million as of June 2024, up from $369.8 million at the end of 2023.
Investors might be concerned about the performance of Corporación América Airports S.A. (NYSE:CAAP) in the most recent quarter but that shouldn’t detract them from the really solid long-term returns generated by the company over five years. As of September 11, CAAP’s share price has risen by an impressive 202% over the last five years. Moreover, the company’s earnings per share (EPS) have grown at a compound annual growth rate (CAGR) of 32.84% over the past five years and its net income has increased at a CAGR of 32.94% during the same period.
CAAP can be considered cheap at current levels. It is trading at over 12 times its forward earnings. Analysts have a consensus buy recommendation for the stock, and their median price target of $21.50 reflects an upside of 47.66% from current levels.
Overall CAAP ranks 1st among the best airport stocks to buy. While we acknowledge the potential of CAAP as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than CAAP but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure: None. This article is originally published at Insider Monkey.