Shares in low-cost, long-haul airline Norwegian rose almost 2% after it posted a surprise profit and record revenue in the second quarter.
Norwegian, which has been repeatedly linked with takeover bids from Aer Lingus owner IAG in recent months, exceeded analyst forecasts by posting a net profit of €31.68m in the second quarter, compared with a loss of €70m a year earlier.
The airline, which launched the first ever transatlantic flight from Cork to Providence on the US east coast a year ago, said its results were boosted by a reduction in unit costs, which decreased by 9% this quarter.
Davy said there were “encouraging signs” for the business, for which it has had “long-standing concerns”.
“Our long-standing concern about the Norwegian business model was that despite double-digit growth through 2016, 2017 and early 2018, it was not achieving any meaningful scale efficiencies,” Davy said.
All eyes would be on Norwegian to see if it can follow up improvements in the coming months, Davy added.
“We expect that the stock price, however, will continue to largely reflect the likelihood of an acquisition.”
Earlier this year, Norwegian said it received two separate conditional proposals from IAG but that they were “unanimously rejected on the basis that they undervalued Norwegian and its prospects”.
IAG, which also owns British Airways, Vuelin, and Iberia, bought a 4.6% stake in Norwegian in April.
However, IAG boss Willie Walsh said it will not enter a bidding war for the airline.
Lufthansa is also said to be mulling a bid for Norwegian.
The airline recently scrapped its winter route from Cork and Shannon to Providence in Rhode Island but has shaken up transatlantic rivals, as well as poaching pilots from Ryanair in recent times.
Norwegian chief executive Bjorn Kjos said: “Despite being at the peak of our growth phase, we have been able to present a profit and decreased unit costs during the second quarter. Going forward, the growth will slow down and we will reap what we have sown for the benefit of our customers, staff and shareholders.”
It said it plans €1.5bn in capital expenditure this year.
Norwegian made no mention of the reported interest from other airlines in its update. Shares in the firm have risen more than 20% this year.
Cork Airport said over 31,000 passengers travelled between Cork and Providence in Rhode Island on the Norwegian Air route. Some 60% of the passengers are from the US, the airport added.
- Additional reporting Reuters