“Easyjet Plc numbers within the expected range but toward the lower end of guidance. The dividend increase of +22% to 55.2p has been well received by the market
- The weakness in the price is down to a number of factors.
- No special dividend payment – many were expecting this to be a larger % and a confirmation of a special dividend.
- FX movements
- The large move in oil
- Guidance towards the lower end and re pricing weakness
Also we look at the strategy and timing of the move to spend $3.8bn on new planes, even with a potential cost reduction on the purchases (albeit at the same time slowly removing the A319s). We see the outlook to remain positive for the sector and much of this will be led by the growth strategy, Rev per seat increases, concerns regarding pricing weakness overdone and market share they will look to increase steadily from incumbents. Given this we would look for more exposure and sector rotation into the airlines with the business model for Easyjet strong enough to warrant investment at current levels.The sector discount v peers we see coming back into line as this anomaly is unwarranted and mispriced by the market. Much of this will be led by an improving economic outlook vs the short term disappointment regarding no special dividend and overcapacity.”
Atif Latif is the Director of Trading for Guardian Stockbrokers