Shares of Fraport AG rose by more than 2% after Jefferies raised its recommendation on the airport operator to "buy" from "hold," pointing to a shifting business profile driven by lower capital spending and an improving free cash flow trajectory.
In its note, Jefferies identified a turning point for the company following several years of heavy investment and compressed earnings. The brokerage said a stretch of large projects is winding down and that the company is entering a period in which capital commitments will ease, supporting stronger cash generation.
Jefferies made Fraport its top pick among European airport operators and attached a price target of 100 to the stock. The firm emphasized what it called a more stable regulatory path expected in 2026 and forecasted improving returns across Fraport's businesses.
The report listed a number of capital projects approaching final stages, including the commissioning of Terminal 3 in Frankfurt in April and the completion of construction work at Lima airport. As those projects move off the balance sheet, total capital expenditure is expected to fall to 870 million in 2026, down from 1.13 billion in 2025, according to Jefferies' projections.
That drop in spending underpins the brokerage's free cash flow estimates: Jefferies projects 203 million of free cash flow in 2026, rising to 470 million in 2027 and 730 million in 2028. The firm noted that this changing cash profile is a core reason for upgrading the rating.
Regulatory clarity also factored into Jefferies' reassessment. Fraport is covered by a multi-year pricing agreement through 2026, which the brokerage said affords more stability relative to peers that face resets to allowable returns. Jefferies highlighted positive pricing dynamics across both regulated and unregulated divisions, and said these elements should support better returns on capital employed over the medium term.
Traffic patterns were another component of the upgrade. Jefferies stated that capacity is trending higher into 2026, supported by airline scheduling choices, and that passenger volumes at Frankfurt - while still below 2019 levels - are expected to continue recovering. The brokerage noted that the opening of Terminal 3 is likely to align with elevated summer capacity.
On valuation, Jefferies argued Fraport's free cash flow profile stacks up favorably against other European airports and that, based on its estimates, the stock could screen at a double-digit free cash flow yield by 2028. The brokerage added that the market's valuation of Fraport has lagged underlying improvements in cash generation, and that this gap helped justify moving the stock to "buy."
Sectors affected: Airports and aviation operations, travel infrastructure, and market participants focused on cash-generative infrastructure stocks.