Deutsche Lufthansa AG, Europe’s second-largest airline, fell the most in a month after a stock rating downgrade by Deutsche Bank AG raised concern that analysts may lower their earnings estimates for next year.
The shares fell as much as 3.9 percent to 14.23 euros in Frankfurt, the biggest intraday decline since Sept. 4. Lufthansa traded at 14.29 euros as of 11:17 a.m., making the stock the worst performer in the six-member Bloomberg EMEA Airlines Index and valuing the company at 6.57 billion euros ($8.9 billion).
Lufthansa faces headwinds from currencies including the Japanese yen and the Indian rupee, while customer demand and capacity discipline are not as strong as anticipated, analysts including Michael Kuhn said in an Oct. 1 note to clients. Some costs associated with its efficiency program, dubbed Score, may be a “negative trigger event” if the Cologne-based company provides more details in an Oct. 4 update, they said.
“Lufthansa’s reported operating profit could well be flattish in 2014, while the market expectation still is a major improvement,” said the analysts, who lowered their rating to hold from buy with a 12-month price target of 14 euros. “This may well result in disappointment in the short term.”
Operating profit at Lufthansa may increase 76 percent to 956.8 million euros this year, and another 43 percent to 1.38 billion euros in 2014, according to the average of 17 analyst estimates collected by Bloomberg. The company plans to raise the measure to 2.3 billion euros by 2015, contrasting with estimates for 1.85 billion euros.
Lufthansa so far said project costs associated with the Score program will amount to a “low three-digit million-euro amount” to be booked in the fourth quarter, without being more specific.
Deutsche Bank’s Kuhn said the charges aren’t reflected in current analyst estimates.