EasyJet: Closed at all time high yesterday. Eating humble pie!

Wednesday, Feb 06 2013 by
3

easyJet (LON:EZJ) (948.5p and 4.1% of JIC portfolio). Passenger stats for January 2013 show continuation of the strong trend seen over the last year or so. In January the load factor was 84.4% compared to 81.9% in January 2012 and 78.9% in January 2011. So not only is easyJet filling up more of the plane but given its business model of charging more as the plane fills up it should be having a positive impact on profits. Anecdotally I admit but I think that the Company is managing to charge more for summer flights than in 2012.

This trend of improving load factors has been going on for some time now so the comparatives will get increasingly difficult. However, as the planes get fuller it can charge more and also in 2013 we will see the first year of the benefit of allocated seating which is estimated to add £50m to profits.

Conclusion: In the 24th January 1st Quarter trading statement the Company said it expected to contain the first half loss before tax to between £50 million and £75 million compared to the £112 million loss reported in the first half 2012. I suspect that the result will be at the more optimistic end of that range. On 12.5x consensus earnings forecasts for the year ending September 2013, for earnings growth of >30%, I think the shares have further to go. Happy Holder!


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easyJet plc and its subsidiaries is a airline carrier operating principally in Europe. The Company operates approximately 600 routes across more than 30 countries with its fleet of over 200 Airbus aircraft. The Company’s total fleet consists of approximately214 aircraft, split between 156 seats Airbus A319s and 180 seat A320s. The Company’s subsidiaries include easyJet Airline Company Limited, easyJet Switzerland S.A., easyJet Sterling Limited and easyJet Leasing Limited. more »

Share Price (Full)
1450p
Change
19.0  1.3%
P/E (fwd)
11.3
Yield (fwd)
3.5
Mkt Cap (£m)
5,679



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15 Comments on this Article show/hide all

johnrosier 6th Mar '13 1 of 15
1

easyJet (1048p and 4.4% of JIC portfolio); February trading this morning continue the strong trend that started over a year ago. During February it carried 4,112,186 passengers, up 3.4% on the 3,976,741 carried in February 2012. More importantly, the load factor (number of passengers as a proportion of the number of seats available) rose from 87.6% to 90.5%. As the months pass by the comparatives get harder and harder.


Conclusion; as a result of its superb share price performance over the last year the Company is poised to enter the FTSE 100. With current trading as it is, profitability is likely to be at the top end of forecasts and there may even be upgrades. on 13.5x September 2013 consensus earnings (34% growth), 12.2x Sept 2014 (11% growth) and 11.1x Sept 2015 (10% growth) It is , in my view too early to disembark. Happy Holder

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johnrosier 15th May '13 2 of 15
1

easyJet(1130p and 4.3% of JIC); On April 5th easyJet said that it expected the loss for the first half of the current year, October 2012 -March 2013 to come in at between -£60m and -£65m. This morning it has announced a loss towards the bottom of that range at £-61m. It is a fairly lengthy statement which is re-assuring in both its confidence about the outlook and its description of its continuing strategy. The Company is continuing to generate strong cash flow with a net cash position of £433m at 31st March 2013 compared to £42m the year before. The Company says it is evaluating the next generation of short haul engine technology and if it concludes an order will be in the interest of all shareholders it will bring a proposal o shareholders. No doubt another spat with Stelios is looming!


Conclusion: easyJet, through its efficient management of the business seems to have a highly competitive business which is in a virtuous circle of sorts. It is generating a lot of cash which management has demonstrated it is happy to return to shareholders. On 11.4x September 2015 forecast earnings I believe the shares have further upside and will not be heading for the exit yet! Happy Holder!

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johnrosier 4th Jul '13 3 of 15
2

easyJet (1320p and 5.2% of JIC portfolio) has issued June's passenger statistics which show total passengers carried up 1.9% at 5.537m compared to June 2012. It points out that due to strikes  by French air traffic controllers it had to cancel 585 flights compared to only 22 in the prior year. I estimate that this cost just over 1% growth over the previous year. The load factor was flat year-on-year but the rolling 12 months figures show a 0.5% increase to 89.2%.

Conclusion: easyJet hit a new high earlier this week at 1348p and the trend remains clearly upwards. Quite chunky director buying during June is also good to see. On a PE ratio of 15.5x for the year to September 2013 and 13.9x to September 2014 for 11% growth the shares still look attractive, especially as the broking community still seems to "behind the curve" on this one. The chart below shows estimates for the current year and how they have evolved over time. Last August consensus forecasts were for 60p of earnings; consistent upgrades mean that now forecasts stand at 85p! Happy Traveller!

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johnrosier 24th Jul '13 4 of 15
1

easyJet (1336p and 5.0% of JIC)has issued its trading statement covering the third quarter to 30th June 2013. I will cut straight to the chase; it says that it expects profit before tax for the year to September 2013 to be between £450m and £480m. This compares with current consensus forecasts of £443m, so analysts, sharpen your pencils and start upgrading your forecasts, yet again!


Highlights were; total revenue up 10.5% driven by3.6% increase in capacity and 6.1% increase in revenue per seat. Cost per seat increased by 4.5%. It has acquired Flybe’s 25 slots at Gatwick. It has secured its new framework arrangements for new aircraft through to 2022 to allow it to continue to execute its strategy. Net cash was £714m at 30th June.


Conclusion; easyJet is performing brilliantly. It is cementing its position as the leading European short haul carrier as it increases efficiency and profitability. It is squeezing its competition, which is reducing capacity, which easyJet is filling; Flybe’s 25 slots at Gatwick being a prime example. The top end of the company’s guidance at £480m is pretty much the current consensus forecasts for September 2014! Upgrades on the way! Easyjet is on about 14.8x 2013 earnings for around 50% earnings growth and an estimated 13.5x 2014 for a further 10-15% earnings growth. Very Happy Holder!

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PhilH 24th Jul '13 5 of 15

Hi John,

I've held easyJet (LON:EZJ) since spring last year and enjoyed a whopping 185% increase. I've sold significant portions of my holding on the way up.

The statement today states that ... "Easyjet has delivered a strong performance in the third quarter in a benign capacity environment for easyJet".

I'd really counter this 'benign environment'. The thing that attracted me to both easyJet (LON:EZJ) and Dart (LON:DTG) was that it was a harsh winter and it lashed down for months. Everyone around me was moaning. I was noticing that I was looking to sunnier climbs. For me the weather drove the growth and that is why I have been careful with my exposure to both companies, taking significant profits along the way. Now the weather has been so glorious and the fact that we're heading into the low season I'm tightening my virtual stops, riding the momentum, but preparing to exit stage left.

I'd be interested in your thoughts.

Cheers
Phil

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johnrosier 24th Jul '13 6 of 15
1

Hi, I think what they mean is that there is little new capacity coming onto the market in terms of aircraft. The table below shows what is going on in European markets. I think the industry is polarising into winners and losers with ZJ very much a winner. This means easyJet is having a good ride and anyone who flies regularly with easyJet will know prices are a lot higher than in recent years. Whilst analysts are so far behind the curve with earnings forecasts I will hang on as I think the shares can go a lot higher. I'm not worried about the "low season" as the market I think, is more interested in y-o-y comparatives and this year is the first year of the benefit to passenger revenue from allocated seating.
A bit of a ramble but the only reason I can seem myself selling is if it becomes too big a proportion of the portfolio and/or the valuation gets really stretched.

European aircraft capacity growth; Summer 2013 vs Summer 2012
%
Adria -7.1
Air Baltic -3.4
Air Berlin -4.0
Air Europa -2.4
Air France -8.7
Air One -14.7
Brussels Airlines -2.0
Croatia Airlines -10.6
Estonian Air -43.4
Flybe -2.2
Iberia -15.9
KLM -4.0
LOT -2.6
NIKI -18.9
Olympic -37.7
TAP -0.2

Source: Morgan Stanley

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johnrosier 25th Jul '13 7 of 15

easyJet (1385 and 5.1% of JIC). Following yesterday’s trading statement I have seen a number of upgrades to earnings forecasts of around 7or 8% to earnings of 97p for September 2013, 110p for 2014 and 120p for 2015, putting the shares on a PER of 14.2 x 2013, falling to 12.6 x and then 11.5x.


Conclusion; I have heard that one deservedly respected fund manager has a target price of £20 for the shares. This seems eminently sensible to me given the commanding position easyJet has developed in the European market, the returns it is making and the cash that it is generating. Happy Holder.

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johnrosier 5th Sep '13 8 of 15

easyJet (1215p and 3.1% of JIC)Traffic stats show that in August it carried 3.9% more passengers than the year before and that its load factor was up 1.1pp to 92.8% v 91.7%. This should have been a very profitable month!

Conclusion: A great August for easyJet against difficult year-on- year comparables. So although easyJet was hit yesterday by Ryanair's profit warning , I would expect the shares to bounce back strongly. I might buy back the stock I sold a few weeks ago!

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johnrosier 3rd Oct '13 9 of 15

easyJet(1314p and 4.9% of JIC) An excellent trading statement from easyJet this morning post its year end in 30th September. It says that it expects pre-tax profits to be in the range of £470m to £480m compared to its 24th July guidance of £450m to £480m. Capacity growth at 3.3% and cost per seat (ex-fuel) at +4.0% were in line with expectations. Revenue per seat was up 6%, at the top end of expectations.


In a separate announcement, passengers carried in September were up 4.8% and more importantly the load factor was up 1.2 percentage points at 88.5%; another strong figure.


Conclusion; These results demonstrate that easyJet continues to perform well and has not been hit by the fall off in yields which led to Ryanair issuing a profit warning a month ago. Looking forward, it says it expects adverse currency movements of c. £10m and increased fuel costs of £20-£30m in the first 6 months of the current year. It also says that it has sold a quarter of its available seats for the first half of the current year, in-line with last year. The chart above shows how far the analytical community has been behind the curve; a year ago forecasts were for 60p for the year just ended, now they are more than 50% higher at 92.4p. So on consensus forecasts, which I guess should be taken with a pinch of salt, for September 2014 the shares are valued at 12.4x for 12% growth and for September 2015 on 11.0x for 12.7% growth. Could I see the shares on a higher valuation and could there be further upgrades? I think so. Happy Holder

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johnrosier 6th Nov '13 10 of 15

 

easyJet (1203p and 4.4% of JIC) October trading stats look good! It carried 5.53m passengers in October, up 5.4% on 2012 and the load factor was up to 89.1% from 88.4% last year. The rolling 12 month load factor was 89.4% v 88.6%. We are not told what the revenue is but the fuller the flight the higher the marginal pricing!


Conclusion; easyJet’s share price has struggled since the mid-summer, not helped by two profit warnings from Ryanair, the second of which was on Monday this week. We get more news from easyJet later this month when it issues its results for the year ended 30th September 2013. Last month however, we had a trading statement covering the period so there should be no surprises. I take comfort from October’s stats and think that Ryanair may just have its own problems, (such as treating its customers purely as numbers). On consensus forecasts the shares are valued at 11.3x September 2014 earnings for 12% growth and 10.3x September 2015 for 9% earnings growth. Still looks attractive to me although I am wary that the stock is sitting right on the 200 day moving average! Happy Holder.

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johnrosier 8th Nov '13 11 of 15

easyJet (1200p and 2.0% of JIC). I have this morning reduced my holding in easyJet to 2.0% of the portfolio. This is a case of brain ruling over the heart! I love easyJet as a business but I can’t ignore the chart above which shows it is struggling to make progress and has closed just below the 200 day moving average. There is of course a risk that it recovers from here which is why I have only halved the holding. With a decisive breakdown from here I would sell the remainder. In any case I am happy to increase my cash holdings further given the strong run we have had in markets.

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mpat89 9th Nov '13 12 of 15
1

Hi John,

Why does the chart say "sell" to you? It's clearly showing that £12 is support and as long as we trade above £12 then it continues to be support. If anything this is a low risk buying opportunity because as you say, a decisive break below here is a clear exit signal, where as if support holds then we can potentially test the highs around £13.75-£14.00 again.

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mpat89 9th Nov '13 13 of 15

Just an additional note to my previous comment, £12 is current support but a real indication of a change in trend would be a break below £11.35 which is previous resistance (in an uptrend we expect previous resistance to act as support - if this isn't happening then we don't have an uptrend).

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johnrosier 19th Nov '13 14 of 15
1

easyJet (1267 and 2.1% of JIC) Results for the year ended 30th September came in at £478m, towards the top end on the £470m-£480m guidance given by the company in its pre-close trading statement. A fantastic set of results which saw revenue up 10.5%, pre-tax profits up 50.9%, margins improve from 8.2% to 11.2% and earnings per share up 62.1% to 101.3p. It has increased the ordinary dividend by 55.8% to 33.5p and in addition it plans to pay a special dividend of 44.1p.


These results were driven by a strong control of costs which saw cost per seat grow by 3.9% on a constant currency basis and by an impressive, 7.0% increase in revenue per seat, helped by the introduction of allocated seating. Passenger numbers were up 4.0% to 60.8m with a 0.6% increase in load factor to 89.3%.
EasyJet acknowledges that it was helped, or took advantage, of a benign capacity environment during the year and in a comprehensive market overview it hints that the industry background may not be so helpful in the coming year.


Conclusion; easyJet continues to be the class act in the European short haul market and as Carolyn McCall, Chief Executive, says in her statement “We will continue to deliver our strategy of offering our customers low fares to great destinations with friendly service so that we can continue to win in a more competitive market. This means we are well placed to continue to deliver sustainable returns and growth for our shareholders." In the short term the Company highlights a number of headwinds and as the CEO says the market will be more competitive. I don’t think there will be upgrades to September 2014 earnings figures at the moment, leaving the shares valued at 11.9x consensus earnings forecasts. I reduced my holding to 2% the other week and will be watching closely to see what happens to forecasts in the coming days. Happy Holder!

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johnrosier 12th Dec '13 15 of 15
1

easyJet(1562p and 4.0% of JIC). I have this morning increased my holding back up to 4%. Clearly my decision to cut my holding back to 2% on 8th November was a mistake. As one of my readers pointed out at the time, I was a little too quick to pull the trigger, worrying that it was breaking down through the 200 day moving average. The 200 dma turned out, as so often happens, to be a good support level.

I have increased my holding because the shares look reasonable value, (on consensus forecasts it is valued at 13.9x current year earnings for 15% earnings growth), the company is generating a lot of cash, (for the second year running it is paying a special dividend; 44p this year, 35.08p last) and the close yesterday, at a new all-time high, looks pretty bullish. In addition, as demonstrated in the lower chart from Stockopedia, analysts are still behind the curve and are upgrading earnings.  (See transactions)

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About johnrosier

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I manage my subscription website  www.JohnsInvestmentChronicle.com in which I show my portfolio and all transactions. I blog within an hour of trading, with an explanation, and send an alert email to all may subscribers. I do not pretend to have all the answers but I hope my portfolio, and the trades, provides food for thought as well as helping those who are new to managing their own portfolios.I think what I do is unique. There are plenty of tipsters out there who will remind you of the good ones and quietly forget the duffers; I do not have that luxury as the portfolio is there for all to see. I have to confront my mistakes and deal with them. A tipster also does not show how a tip fits into the context of an overall portfolio. My portfolio of up to 30 holdings has different holding sizes based on my conviction behind the stock and its risk. I set up www.JohnsInvestmentChronicle.com in January 2012. Prior to that :In September 1984, I left university with a degree in Zoology and started work in the City of London. Over the next twenty five years most of my time was spent managing UK equity portfolios with Fleming Investment Management and Henderson Global Investors, for company and local authority pension schemes as well as the reserve fund for a well known charity. During 2009 I left full time employment and decided to take time out to consider the next stage of my career. In the meantime I have been putting my years of experience to good use investing the family savings. I have thoroughly enjoyed the freedom of investing from home and despite some tricky periods during 2011 it has been a rewarding experience.  more »



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