The company’s shares rocketed up the Irish stock exchange, increasing by more than 7% as the hedge-fund community scrambled to recover their positions after they bet that Ryanair would lower its guidance following their annual report.
Goodbody analyst Donal O’Neill said Ryanair’s shares were benefiting from a ‘short squeeze’, where there is a lack of shares available, forcing the price up.
“Broadly speaking, the hedge-fund community were shortly positioned on the way in to the results. They sold short on anticipation that they could buy it [stock] back lower down, but instead the stock has gone up,” he said.
Mr O’Neill said a lot of hedge funds had lost money betting against Ryanair yesterday.
The company’s deputy CEO Howard Millar described the company’s success in beating its guidance by reporting a 13% rise in profit as “brilliant, cunning, and modest management”.
Ryanair’s profits increased to €569m, beating analysts’ forecasts of €558m.
The airline’s results were boosted by a 6% increase in average fares, with non-ticket income from items such as baggage and reserved seating, which account for about a fifth of Ryanair’s overall business, up by 20%.
In its annual report, Ryanair said it had seen a growth in traffic, despite the recession and higher fuel costs.
“Delivering a 13% increase in profits and 5% traffic growth, despite high oil prices during a European recession, is testimony to the strength of Ryanair’s ultra-low cost model. Fuel costs rose by over €290m, and now represent 45% of total costs,” the company said in its annual report.
Despite the strong set of figures, Ryanair is cautious in forecasting growth, citing a lack of visibility on bookings for later in the year. The company warned that profit growth could stall in the year ahead, seeing profit at between €570m and €600m.
“We have no bookings at all for the winter. The guidance is a ‘guestimate’; we then refine it during the year,” he said.
Mr O’Neill said he expected that Ryanair would outperform their own estimate again.
“They are playing down the yield environment, saying the first quarter was softer than last year, but I’d be quite confident of a very good outrun in their peak summer trading period,” he said.
Mr Millar said investors were buying into Ryanair as the company has a track record of delivering growth and, as soon as new aircraft begin arriving in 2014, the company will continue to grow.