Huge profits and a major increase in earnings enabled the budget airline to reinstate dividends. However, potential impacts from the Israel-Hamas conflict might temper some future expectations.
EasyJet share prices were up more than 3% following the strong results in the company’s latest earning reports.
The British low-cost carrier earned more-than-expected profits of £455 million (€524.74 million) before tax in the fiscal year ending in September 2023, after a loss of £178 million the year before.
Revenues increased by 42% to £8.17 billion in the 12 months to September, due to a surge in demand for travel. The low-cost carrier has opened more than 80 new routes this fiscal year and it reported that passenger numbers increased by 19% over the same period, while revenue per seat rose by 21%.
EasyJet noted the strong performance of its holiday arm too: EasyJet Holidays profits grew 221%, delivering a £122 million profit before tax.
“EasyJet has finally put the ravages wrought by the pandemic to bed, with the tailwinds of consumers returning to travel and the group’s own aggressive measures providing a twin boost,” said Richard Hunter, head of markets at Interactive Investor.
Besides reporting strong results, the company is aiming to reinstate dividends at 4.5p per share, payable early next year and equalling £34 million. The company intends to announce the proposal at its annual meeting in December.
Expectations for the next year
European airlines have been reporting strong results in recent months but war in the Middle East, high jet fuel prices and the threat of recession have subdued outlooks, with some investors warning profits may have peaked.
EasyJet is optimistic, citing strong bookings for summer 2024 and supply constraints in Europe as factors contributing to a positive outlook for the upcoming fiscal year.
However, the UK carrier said geopolitical instability would weigh on the current quarter – the first of the new fiscal year – and that due to the impact of the war in the Middle East, its first-quarter loss was unlikely to improve year-on-year.
The company reported profit and 12% growth in revenue per seat for October (the first month of the company’s 2024 fiscal year) in a yearly comparison.
“Recent consumer research highlights that around three-quarters of Britons plan to spend more on their holidays versus last year with travel continuing to be the top priority for household discretionary spending,” EasyJet chief executive Johan Lundgren said in a statement.
Is it time to buy EasyJet shares?
“The airline sector has traditionally been a difficult one in which to invest, with any number of factors outside the industry’s control weighing on prospects, ranging from conflicts to pandemics,” said Hunter in his comments.
He sees promising signs for the low-cost carrier, as seemingly travel is the top priority for UK consumers’ discretionary household spending. The company is also upgrading its fleet with a big new Airbus order and expanding its EasyJet Holidays operation.
The share price has been in limbo for the past few years, but mainly losing investors’ interest especially after the company’s profit was savaged by the pandemic.
EasyJet has a lot to do “to recapture former glories, since the share price remains down by 42% over the last three years and by 60% over the last five,” said Hunter. “In the meantime, the market consensus of the shares as a cautious buy reflects some optimism that a return to EasyJet’s previous ascent may indeed be achievable.”
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