Ryanair Results Relief as More Downgrades Avoided: Street Wrap

(Bloomberg) -- Ryanair Holdings Plc shares rose the most in two months, leading gains on the STOXX 600 Travel & Leisure index, as analysts breathed a sigh of relief that the discount carrier’s first-half results didn’t bring fresh downgrades to earnings estimates.

The stock jumped as much as 5 percent in Dublin and traded up 4 percent as of 10:23 a.m., helping push other airline stocks higher in sympathy. Ryanair has fallen 20 percent this year amid a year-long spat with pilots and cabin crew that together with higher fuel prices led to a profit warning earlier this month.

“The key takeaway from Ryanair’s results is that life doesn’t seem to be getting worse,” Russ Mould, investment director at broker AJ Bell, said in a note. “A decline in profit isn’t a surprise given it had already laid the foundations for a bad set of numbers in a previous trading update. Instead, the market is breathing a sigh of relief that full-year earnings guidance hasn’t had to be downgraded again.”

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Here’s a round-up of what analysts had to say:

Gert Zonneveld, Canaccord Genuity (buy)

• Longer term outlook remains attractive given its low and sustainable cost base and a wide range of growth opportunities at primary and other airports
• Airline is highly profitable, with enviously high double-digit net margins, and generates an Ebitda of close to EU2b
• Despite chunky capex commitments the company continues to return cash to shareholders

Gerald Khoo, Liberum (buy, PT EU14.50)

• Recent profit warning meant there were no surprises
• Margins continue to be squeezed by falling average fares on one side and higher fuel and staff costs on the other
• Recent share price weakness is an opportunity to invest in the industry’s long-term winner despite downside risk to estimates through seasonally weaker winter period

Stephen Furlong, Davy (Outperform, PT EU14)

• As the industry-leading player in terms of market size, margins and balance sheet, Ryanair will be an undoubted beneficiary of the industry malaise.
• Capex is likely to peak in FY2020 at ~EU1.9b as pre-delivery payments, aircraft and other investments come through next year

--With assistance from James Cone.

To contact the reporter on this story: Chiara Remondini in Milan at cremondini@bloomberg.net

To contact the editors responsible for this story: Celeste Perri at cperri@bloomberg.net, Paul Jarvis

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