Shares in Ryanair (LON:RYA) have fallen deep into negative territory this morning as the low-cost carrier posted a profit drop and said that its full-year outlook remained ‘cautious’ on prising. The update comes after FTSE 100 budget rival easyJet (LON:EZJ) updated investors on its half-year performance, posting an interim loss, while reaffirming its guidance.
As of 08:53 BST, Ryanair’s share price had given up 5.60 percent to €10.20. The shares have given up more than 34 percent of their value over the past year.
Ryanair with ‘cautious’ outlook
Ryanair announced in a statement this morning that its full-year profit had dropped 29 percent to €1.02 billion, with traffic growth of seven percent offset by a six-percent fall in fares. The lowcost carrier further disclosed that strong ancillary growth of 19 percent was offset by higher fuel, staff and EU261 costs.
Ryanair further said that its outlook for FY20 remained cautious on pricing, with traffic expected to grow by eight percent to 153 million. The company, however, guided broadly flat on profits.
Reuters reported that while the airline’s chief executive Michael O’Leary had said that weakness in fares may ease in the winter, he had further warned investors that the European airline sector was experiencing a cyclical fall in profitability.
“Frankly, if we are in a period where there are going to be attritional fare wars […] profits will suffer for a year or two and I think that is what shareholders should expect,” he pointed out in a video presentation, as quoted by the newswire.
Analysts weigh in on statement
Reuters reported that Liberum analyst Gerald Khoo had described Ryanair’s profit forecast and guidance of non-fuel costs rising two percent as ‘disappointing,’ while Davy Stockbrokers had said that it would cut its forecast by nine percent, while believing that the ‘nadir point’ had likely been reached.
According to MarketBeat, the low-cost carrier currently boasts a consensus ‘buy’ rating, while the average target for Ryanair’s share price stands at €18.50.