Stock of the day 03/10/2017 – easyJet PLC

Amidst some airline sector turbulence, how will easyJet’s full year statement hold up on Friday?

easyJet has almost risen in spite of itself in 2017. While all three of the year’s updates to date have disappointed, it took until July’s Q3 report for the stock to get in any really trouble. Before that it had climbed from an opening price of £10.10 to a (very brief) 13 month peak of £14.42 on the morning of those third quarter results. Since then, however, it has struggled, now sitting at a current trading price of £12.90 (Spreadex, 03/10/2017).

(Source: Spreadex, 03/10/2017)

Its first quarter update towards the end of January saw easyJet warn that the lower pound would slash its full year profits by £105 million. That news easily outweighed an 8.2% rise in passenger numbers and a 7.2% surge in total revenue to £997 million for the final 3 months of 2016, dragging the stock 8% lower in a single session.

The reception for the company’s interim figures in mid-May wasn’t much better. There easyJet posted a headline pre-tax loss of £212 million, far higher than the £21 million loss seen the year before. Understandably this was the focus for investors, who ignored a 3.2% jump in revenue to £1.83 billion and a 9% increase in passenger numbers to 33.8 million.

Cut to the easyJet’s third quarter figures in July and things seemed to be improving. The company stated that its full year pre-tax profits would fall somewhere between £380 million and £420 million, higher than the £375 million forecast by analysts. However, the stock still plunged after the update, with investors concerned about a) how far that pre-tax profit figure is below the numbers reported in 2015 and 2016, b) how revenue per seat is set to fall 2% in the 2nd half of the year and c) the news that ITV had poached CEO Carolyn McCall.

In terms of Friday’s statement, investors will be keen to hear at what end the spectrum its annual pre-tax profit will fall on. They’ll also want an update on its talks with Air Berlin about buying parts of the German carrier, news of its CEO search and an idea of how the firm may benefit from Ryanair’s recent troubles and the collapse of Monarch Airlines.

easyJet PLC has a consensus rating of ‘Hold’ with an average target price of £12.42.