EasyJet profit forecast disappoints market, shares fall

LONDON Thu Jul 24, 2014 5:14am EDT

An EasyJet Airbus aircraft is seen at Ljubljana's airport Brnik February 16, 2012. REUTERS/Srdjan Zivulovic

An EasyJet Airbus aircraft is seen at Ljubljana's airport Brnik February 16, 2012.

Credit: Reuters/Srdjan Zivulovic

LONDON (Reuters) - Budget airline easyJet (EZJ.L) forecast annual profit growth of 14 to 19 percent on Thursday, tempering market forecasts set at the top end of the range and sending its shares down 3.8 percent.

Providing its first guidance on full-year profit in its third-quarter statement, easyJet said it saw pretax profit for the 12 months to the end of September in a range of 545 million to 570 million pounds ($928.5-971.1 million), factoring in the impact of political events in Israel, Egypt and Russia.

Analysts had forecast pretax profit of 569 million for the current financial year, according to Thomson Reuters data.

Shares in easyJet were down 3.8 percent at 1,348.5 pence by 0836 GMT, paring an earlier decline of as much as 8 percent.

"We think that this outlook statement adds to investor unease that consensus forecasts have generally run ahead," said Cantor Fitzgerald analyst Robin Byde, who rates easyJet a "hold".

The majority of brokers, however, are more positive on the company with 15 out of 25 rating it either a "buy" or a "strong buy".

The airline's low-fares model has helped it and budget rival Ryanair (RYA.I) weather an increasingly competitive European short-haul market, while traditional carriers have struggled.

Air France-KLM (AIRF.PA), Europe's second-largest traditional network airline, warned this month that its 2014 profit could be as much as 12 percent lower than previously forecast, mainly due to overcapacity and weak prices.

Germany's Lufthansa (LHAG.DE) last month lowered its profit targets for the next two years.

In 2013 easyJet's shares doubled in value and rose earlier this year to an all-time high of 1,853 pence in April. Since then the shares have fallen by 27 percent amid questions about its future rate of growth.

The airline, which reduced its cost per seat, excluding fuel and currency movements, by 1.3 percent year on year, said its performance gave it confidence in future growth.

"There are significant and profitable opportunities for easyJet to grow within its core markets over the next three to four years," the company said.

Numis analyst Wyn Ellis said easyJet's third-quarter performance should be seen as "reassuring" in the context of recent weakness in the share price and cited its revenue per seat growth of 1.7 percent on a reported basis.

The airline for its part called the third-quarter performance "solid". It added 6.8 percent in capacity in an environment where competitor capacity on easyJet routes is expected to be around 4 percent higher this summer.

"Traffic numbers have increased every month throughout 2014 with the busiest months of the year still to come," Accendo Markets analyst Marc Kimsey said, referring to the summer holiday months of July and August.

(Reporting by Sarah Young; editing by Tom Pfeiffer and Jason Neely)