20th Jul 2023 12:58
(Alliance News) - Analysts were pleased easyJet PLC on Thursday, after it reported that its quarterly revenue soared, whilst it swung to a profit.
Richard Hunter, head of markets at interactive investor, commented: "It is difficult to avoid the conclusion from these numbers that, operationally and financially, easyJet is flying."
The last year has been critical for airlines, with firms "desperately trying to reverse the ravages which the pandemic wrought," Hunter noted.
In its third quarter ended June 30, the Luton Airport-based low-cost airline said revenue jumped 34% to GBP2.36 billion from GBP1.76 billion a year earlier.
Passenger revenue increased 30% to GBP1.50 billion from GBP1.15 billion a year earlier. Airline ancillary revenue was up 28% to GBP622 million from GBP486 million. Holidays revenue more than doubled to GBP237 million from GBP117 million.
easyJet swung to a headline pretax profit of GBP203 million from a loss of GBP114 million.
"easyJet's doing a great job at controlling what it can, and the cost-base and proposition are spot on," said Sophie Lund Yates, lead equity analyst at Hargreaves Lansdown.
"The easyJet Holidays business is going from strength to strength too, as post-pandemic travel needs seem to lean towards convenience offerings. The way in which holidays are treated has definitely shifted, with time in the sun appearing in family spending as an essential, rather than an option. How long this can continue while interest rates continue to rise is unclear, but the level of overall resilience being seen in travel spending is providing a much larger buffer for the likes of easyJet than had been expected."
RBC Brewin Dolphin's Zoe Gillespie was also pleased with easyJet's results, noting that its "positive momentum in recent months has finally begun to feed through into results."
Looking ahead, ii's Hunter said that easyJet is "equally buoyant."
easyJet said that based on current booking trends, it expects to deliver a "record" pretax profit in the final quarter of its financial year. Although, it noted that this guidance is subject to the operational environment with the whole industry seeing challenging conditions this summer.
"Wider industry strikes have the potential to cause havoc across the system, and the extent of this won’t be known just yet. The broader implications of sweeping cancellations or changes will dent profit momentum in a big way if the issues are protracted," said Hargreaves Lansdown's Lund Yates.
Hunter also noted air space and air traffic control disruptions in the coming months. He also noted that "the resilience of the consumer had also been a concern given the parlous economic backdrop in the UK, but for the moment there are few signs of holidays being sacrificed come what may."
Chief Executive Officer Johan Lundgren said: "We are absolutely focused on mitigating the impact of the challenging external environment on our customers and flying them on their well-earned holidays."
Liberum's Gerald Khoo, meanwhile, said that the outlook is "generally encouraging." But, he warned that the lack of full-year pretax profit at this late stage of the year is a "little disappointing." The company's financial year ends in September. Despite this, Khoo expects current consensus to be supported.
Moving into this winter, easyJet said it is seeing "good" booking momentum, with sold ticket yields and load factors ahead year-on-year, and planned capacity up over 15% for the December quarter.
"easyJet is clearly on a strong flight path, but the share price recovery still has far to go," said ii's Hunter.
Shares in easyJet were down 2.2% to 484.00 pence each in London on Thursday at about midday. In the past 12 months, the stock is up 24%, but over the last two years, the stock remains down by 24%.
Peel Hunt's Alexander Paterson said that it sees the updates as "encouraging" and reiterated its 'buy' rating and 770p target price.
Hunter concluded: "This latest update should provide significant promise on more immediate prospects, with the market consensus of the shares as a strong hold quite likely to come under upward pressure."
By Sophie Rose, Alliance News reporter
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