Finnair - Earnings are climbing again
Finnair’s Q4 earnings reached a record high especially due to efficient operations. Trends and outlook are now encouraging as the sector should continue to grow at a solid mid single-digit rate this year as well, and Finnair is positioned to see a significant rebound in its earnings.
Q4’25 efficiency may not be repeatable every quarter
Finnair’s EUR 790m Q4 revenue was near the EUR 802m/796m Evli/cons. estimates, however comparable EBIT reached a record high of EUR 62m and was thus clearly above the EUR 48m/44m Evli/cons. estimates as most cost items were at least a bit below our estimates. Such low costs may not be repeatable throughout the coming quarters due to natural variation, but the continued mostly favorable operating environment in our view implies Finnair has good chances of achieving FY’26 comparable EBIT above the EUR 155m guidance midpoint.
EBIT is to clearly improve at least over the next 3 quarters
The EBIT guidance range wasn’t surprising, yet we revise our FY’26 estimate up by almost EUR 15m due to the strong operational performance seen in Q4. Finnair’s 5% planned ASK growth this year is to be allocated mostly to Asia and Europe, areas which have developed well recently. Finnair should be able to place the additional capacity there profitably when passenger volumes continue to grow while ticket pricing holds quite steady. North Atlantic demand growth remains soft relative to capacity, although recent traffic data suggests there may now be early signs of stabilization. We estimate Finnair FY’26 revenue to grow 7%, driven by Asia and Europe, which would be in line with peers. The lack of industrial action this year would by itself be enough to help Finnair’s EBIT improve by some EUR 70m, yet we estimate the figure to gain by about EUR 50m on top of that to EUR 182m (or 5.5% EBIT margin). Q1’26 EBIT may in our view nonetheless remain negative.
Multiples also reflect expectations of almost 6% EBIT margin
Finnair is valued around 8x EV/EBIT on our FY’26-27 estimates, a level slightly higher than peers’. The multiples aren’t very high if the current favorable environment persists; we estimate EBIT margin to improve by 30bps more next year, which could still prove a conservative estimate as in our view an EBIT margin of above 6% is also possible already then. Our new TP is EUR 3.3 (2.7) as we retain REDUCE rating.