Ryanair shares dip after earnings fall

Ryanair shares fell nearly 4% yesterday on the back of the airline missing quarterly earnings targets and admitting its full-year outlook is looking vulnerable.

Ryanair yesterday reported third quarter revenues for the three months to the end of December of €1.34bn, up 1% year-on-year. However, net profits fell by 8% to €95m and earnings per share fell 2% to 7.60c.

Analysts had expected revenues of €1.36bn and net profits of closer to €100m for the period. A major driver for the disappointing figures was a 17% fall in average fares, to €33. While the company had hinted at that, its guidance had been for a fare fall of between 13% and 15% for the quarter.

The company’s shares declined by 3.76%, or 56c, yesterday, wiping off around €700m from its market value, leaving it at around €18.2bn.

Ryanair’s financial year runs to the end of March and management has kept to its full-year net profit guidance of between €1.3bn and €1.35bn, although it remains “cautious” on its outlook.

“This guidance heavily depends on the absence of any unforeseen security events affecting close in bookings,” the airline said yesterday.

Customer numbers increased by 16% year-on-year in the third quarter to 28.8m and load factors — which measure the amount of seats filled on planes — jumped to record levels in the period.

The company expects to carry over 119m passengers this financial year, although it recently said it will see a 3% drop in Irish passenger numbers to 14.4m.

However, management also expects yields in the current fourth quarter to decline by as much as 15%.

In keeping with other European airlines, Ryanair has said it expects pricing pressures to continue into its next financial year.

“Recent downgrades to Lufthansa and Air France, due to yield pressure and higher oil prices would suggest the industry will come under some pressure in 2017,” said Dylan Simmonds of Merrion Stockbrokers.

“However, we do feel Ryanair offers the best business model of all the European airlines and will continue to take market share from their less efficient rivals.”

Ryanair said that it will respond to the challenging pricing environment with strong traffic and route growth and lower unit costs, including fuel savings of around €65m. It reiterated its stance that it will grow at a slower pace than usual in the UK, as the consequences of the Brexit vote become clearer, but expects to continue to grow strongly in continental Europe this calendar year.

The decline in sterling, following the Brexit vote, was also blamed for falling yields in the latest quarter.


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