CAAP: Expanding Air Traffic And Portfolio Investments Will Drive Earnings Momentum

Key Takeaways

• Sustained passenger growth and expansion into commercial revenue streams are driving resilient earnings and improving margins across multiple markets.
  
• Geographic diversification and ongoing infrastructure investments are reducing risk and supporting long-term capacity, competitiveness, and cash flow stability.
  
• Heavy reliance on economically unstable Argentina, regulatory risk, rising costs, and ambitious expansion create sustained vulnerability to margin pressure, cash flow strain, and unpredictable market trends.

Catalysts

Through its subsidiaries, acquires, develops, and operates airport concessions.

• Robust and accelerating passenger growth across key markets, particularly Argentina, Brazil, Italy, and Armenia, reflects the long-term global trend of increased air travel demand, especially in emerging markets. This is expected to drive sustained revenue and EBITDA growth going forward.
  
• Expansion of commercial and non-aeronautical revenue streams-including new duty-free areas, shopping malls, cargo innovations, and service offerings-positions CAAP to capture additional revenue per passenger, further supporting net margin improvement and resilient earnings growth.
  
• Diversified geographic footprint across South America and Europe has enabled CAAP to achieve new traffic and revenue records in several countries in different quarters, reducing earnings volatility and de-risking cash flows, which supports a higher valuation multiple.
  
• Ongoing major infrastructure investments, such as the Florence Airport Master Plan (recently environmentally approved), expansion projects in Armenia, and future growth opportunities in M&A and concessions, should increase capacity and competitiveness, underpinning future top-line and adjusted EBITDA expansion.
  
• Strong momentum in air cargo revenues, up 30% year-over-year and supported by improved pricing, new cargo business models, and e-commerce trends, is expected to drive a meaningful uplift in both revenue and EBITDA margins as global trade and logistics demand increase.

Corporación América Airports Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Corporación América Airports's revenue will grow by 3.6% annually over the next 3 years.
• Analysts assume that profit margins will increase from 8.1% today to 22.7% in 3 years time.
• Analysts expect earnings to reach $472.1 million (and earnings per share of $2.18) by about September 2028, up from $151.4 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 11.1x on those 2028 earnings, down from 20.4x today. This future PE is lower than the current PE for the US Infrastructure industry at 21.7x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.29%, as per the Simply Wall St company report.

Corporación América Airports Future Earnings Per Share Growth

Risks

• CAAP's largest market, Argentina, while showing strong growth, remains highly exposed to economic instability, currency devaluation, and inflationary pressures that repeatedly outpace revenue growth in local currency, which can negatively impact consolidated net earnings and margins over the long term.
  
• The company's concession model depends heavily on government agreements and ongoing negotiations, especially in Argentina with the rebalancing process and in other countries with upcoming expansions, exposing CAAP to political risk, regulatory uncertainty, and potential contract renegotiation or expropriation, which could reduce or disrupt long-term revenue streams.
  
• Rising operating costs, particularly staff salaries in inflationary environments (e.g., Argentina), are increasing more quickly than the rate of currency devaluation, pressuring margins and potentially eroding EBITDA improvements if inflation remains uncontained.
  
• Expansion plans and diversification-including M&A opportunities in emerging markets and large CapEx programs for new commercial spaces and airport upgrades-increase financial leverage and expose the company to refinancing and execution risks, which could negatively affect free cash flow and net margins if returns on investment underwhelm or debt service costs rise.
  
• Flat or declining air traffic and revenues in markets such as Ecuador, combined with dependence on continued strong demand recovery for passenger and cargo volumes, mean CAAP remains vulnerable to shifts in global travel trends, geopolitical disruptions, or regulatory changes (such as stricter environmental policies) that could lead to long-term revenue stagnation or contraction.

Valuation

• The analysts have a consensus price target of $25.34 for Corporación América Airports based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $28.0, and the most bearish reporting a price target of just $24.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $2.1 billion, earnings will come to $472.1 million, and it would be trading on a PE ratio of 11.1x, assuming you use a discount rate of 8.3%.
• Given the current share price of $18.94, the analyst price target of $25.34 is 25.3% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.