Shares in easyjet (EZJ) fell 7% to £10.20 today, despite news the Luton-based budget airline expects to almost halve first-half losses following a surge in Easter bookings. Investors chose to take profits following a run that has taken the firm into the FTSE 100 on a day when airlines were the big losers, with British Airways-owner International Consolidated Airlines (IAG) falling 7.7% to £232.8p.
In a trading update covering the half to March, easyJet left guidance relatively unchanged following its previous update at the start of the year (24 Jan). The low fares operator still expects to report a pre-tax loss of 'between £60 million and £65 million', narrowed down from previous guidance of a £50 million to £75 million deficit. 'First half losses have been halved year on year through our disciplined approach to capacity deployment and a focus on cost management over winter', said chief executive officer (CEO) Carolyn McCall today.
During the half, the airline achieved revenue growth per seat of 8.5%, driven partly by a late surge in bookings in the run up to this year's early Easter. However, the company pegged back its capacity growth expectations from 3.5% to 3.3%, pointing out that bitter winter weather had resulted in a higher level of cancellations than expected. Investors were also informed that sterling's weakening against the Euro, US dollar and Swiss Franc would have an adverse impact on first half profits, which will also feel the pinch from changes in the fuel price.
Following today's update, James Hollins at Investec Securities notes that easyJet is 'performing very well across both yields and cost efficiencies' and has upgraded his recommendation from 'hold' to 'buy' on a new price target of £12.00, raised from £9 previously. For the year to September, the analyst is looking for growth in taxable profits from £317 million to £414 million and has upgraded his earnings estimate 11.5% to 83.4p a share. For the following year, Hollins see profits soaring again to £478 million, sending his earnings forecast up almost 14% to 93.1p.
