3rd October 2014
Budget airline Easyjet has reported a strong summer season after benefitting from Air France strikes and a refining of its no-frills approach to flying.
Analysts are looking favourably on Easyjet following a pre-close trading announcement where the airline said it was increasing its full-year profit guidance range from £545-£570 million to £575-£580 million. The announcement saw the shares rise 6% in early trading today.
The increase in profit guidance is due to a pilot strike at rival Air France last month, and lower than expected fuel costs, as well as strong demand for short-haul European travel that boosted revenue per seat.
The Share Centre retained a ‘hold’ on the shares. Investment research analyst Ian Forrest said: ‘The airline sector is very competitive and several are adding capacity by increasing the number of plans and routes at the moment.
‘However, the effective management team led by chief executive Carolyn McCall, has successfully refined the company’s no-frills approach. We continue to recommend investors ‘hold’ Easyjet due to its strong trading position, the falling oil price and the prospect of increased dividends.’
Jefferies analyst Mark Irvine-Fortescue retained a ‘buy’ recommendation and a target price of £15.00 on the shares although took a more cautious view and said his preference for Ryanair remains.
‘Upgraded full year guidance confirms a strong Q4, with a positive revenue per seat and help from weak competitive and fuel,’ he said. ‘We expect modest consensus upgrades and a positive market reaction. We are more cautious into winter but fuel help, and a higher profit base, leaves us happy with our above consensus full year 2015 estimates for now.’
He added that there is ‘significant opportunity’ for improved revenue performance and shares are expected to move up over the next 12 months.
‘A £100 million special dividend is possible in November but more likely in full year 2015,’ he added.
Numis analyst Wyn Ellis was far more confident and retained a ‘buy’ recommendation with a target price of £21.00.
‘We believe today’s update demonstrates the strength and resilience of the Easyjet model in the face of material market capacity increases,’ he said. ‘We remain confidence of the outlook and of the opportunities for further profitable growth and market-leading returns. We have increased our full year profit before tax forecast from £567 million to £579 million and, at this early stage, leave our full year 2015 forecasts unchanged.’