Bookies backing ongoing Ryanair growth

It’s a good illustration of how strong a run of growth Ryanair is on that the country’s main bookmaker is hawking short odds on the airline reaching profit levels of €1bn in its current financial year.

Within a few hours of Ryanair presenting an as-expected record set of annual results Paddy Power came out with odds of 2/1 that the airline’s profits will reach €1bn in its current financial year, which runs to the end of next March.

While that bet seems to have a touch of value to it, as Ryanair said it expects to see 10% profit growth this year, it must be remembered that the airline upped its guidance three times in its last financial year, and still beat expectations.

“Guidance for fiscal-year 2016, for €940m-€970m — we are currently on €959m — has to be seen as bullish, as usually it is assumed that Ryanair likes to be cautious in terms of its outlook at this time of the year,” said Mark Simpson of Goodbody Stockbrokers.

Indeed, a 10% profit rise guidance was Ryanair being cautious, as management said yesterday. Passenger levels, up 11% to 90.6m in the last year, are set to rise by another 10% this year, to 100m.

Davy yesterday rose its price target on Ryanair to €12. The airline’s share price jumped about 4.8%, to €11.40, yesterday. The broker said it thinks profits will come in at the top end of Ryanair’s guidance.

“We view the fiscal year 2016 guidance as very robust at this time of year and we are likely to move our numbers broadly towards the top end of this range. This is indicative of the health of the business model, with key performance indicators indicating traffic growth of 10% to 100m passengers, unit costs down 2% and average fare falls of 0%-2% in the first half and 4%-8% in the second half,” said Davy’s Stephen Furlong.

Key drivers in Ryanair’s growth have been its cost control and competitive fares, as well as its ‘Always Getting Better’ customer service improvements. Management said, yesterday, that it would keep to its charter of always offering the lowest price on all its routes.

It added that it is beating rival, EasyJet on many routes since introducing its customer service improvements, but analysts noted yesterday that the two airlines only directly compete on less than 5% of routes.

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