Stock of the week: easyJet
British low-cost airline easyJet has predicted its full year profits are set to soar following an encouraging third quarter trading update this week. The report showed a robust performance with revenue up 14% to £1.6bn and a 9.3% increase in passenger numbers.
Shares lifted off following the news, enjoying a near 4% jump in response. However, the sustained action by air traffic controllers in France and Italy was a major factor behind the cancellation of 2,600 flights in the period, along with severe weather, which all combined to impact on revenue.
The company is reported to be preparing to make a formal protest to the European Commission about the industrial action next week. The group raised its full-year profit guidance range from £530-£580m to £550-£590m although costs per seat are expected to rise a little faster than previously thought.
The update indicated a strong performance by easyJet in the face of significant external challenges and the raising of profit guidance clearly pleased the market with the shares up 3% in early trading.
The 11.5% increase in ancillary revenue, which includes passengers choosing allocated seating and adding bags, was especially positive news.
We continue to recommend the shares as a ‘buy’ for medium risk investors as the company has good momentum with its trading, a relatively strong balance sheet and a number of opportunities for further growth, although the regular industrial action in France is clearly hampering progress.