EasyJet Hits An Air Pocket Despite Confirming Better Guidance   

EasyJet Hits An Air Pocket Despite Confirming Better Guidance   

CMC Markets  | Oct 08, 2019 08:36

Markets in Asia have had a positive session, helped by a rebound in Chinese markets, as they return from their week long holiday break. Optimism over some form of mini deal appears to be helping with some of the gains, though US investors appear more pessimistic after finishing the day lower.

The ebb and flow of trade talks appears to be becoming more a case of background noise for investors now that tariffs are kicking in, and may well explain why there has been little reaction to the escalation overnight after the US Commerce Department put another 28 Chinese companies on the so called “Entity List”.

European stocks have taken their cues from the positive session in Asia, despite the latest Chinese Caixin services PMI coming in at a seven month low.

Well, that was short and sweet, it would appear that Hong Kong Exchange and Clearing (HK:0388) has decided that it won’t pursue its interest in London Stock Exchange (LON:LSE), thus leaving the LSE free to pursue its strategy of diversifying into the competitive world of market data and taking on the likes of Bloomberg. This has seen LSE shares drop sharply on the open, but given that they are all time highs already, those who were anticipating a higher offer will now have to offload their speculative punts.

In reality the HKEX deal was never a realistic possibility when set against a hostile management at the London Stock Exchange and a Chinese regulator who were lukewarm at best. Even if HKEX had decided to up their offer, the deal was of questionable merit, given the problems in Hong Kong right now, along with the exchange’s management structure, which raised concerns about Chinese possible government influence.

When EasyJet (LON:EZJ) last reported in July the company reported a 11.4% rise in revenues and said it expected capacity to rise by 0.7% in H2. Management also said they expected headline profits before tax to come in between £400m and £440m for the current fiscal year.

Today’s latest update confirmed this higher guidance, and firmed it up to between £420m to £430m with passenger numbers increasing by 8.6% to 96m driven by an increase in capacity to 105m seats.

Investors it seems are less impressed with the share price hitting an air pocket today, falling over 5%, though we did hit five month highs yesterday.

The improved guidance was mainly driven by increased demand due to strikes at British Airways and Ryanair (LON:RYA), with total revenue per seat for the second half rising by 0.8% an outperformance from previous guidance, though on the year will still show a decline of 2.7%. In signs that overcapacity still remains an issue the load factor fell to 91.5%, and while this might improve by year end it is still evident that the industry still has too many seats at a time when consumers are opting to stay at home more and more.

As far as forward bookings are concerned these are currently in line with expectations, though management are more optimistic about total revenue per seat improving into the end of the year. It would appear that given the improvement seen in the second half, due to the woes of its competitors, is raising expectations that the collapse of Thomas Cook, may help in terms of improving passenger numbers.

On the currencies front the pound is still being moved around by the ebb and flow of Brexit politics, with the UK government publishing its latest guidance around temporary tariff structures in the event of a no deal scenario.

US markets found progress much more difficult yesterday slipping lower after the strong gains on Friday, pushing back from levels that are already elevated and close to all-time highs.

On the earnings front we have the latest Q3 numbers from Levi Strauss (NYSE:LEVI) who IPO’d earlier this year., and was one of those rare beasts that is actually profitable. It did help that it has a tried and trusted business model, as well as brand. Despite this its share price performance has been underwhelming, with the shares currently just about above their IPO price.

When the company reported in Q1 profits came in at $146.6m or $0.37c a share on revenues of $1.44bn, with sales strong in both the US and Asia markets. In Q2 the company stumbled due to the costs of its IPO, it missed profits expectations, by $0.05c a share, coming in at $0.07c. Revenues were better than expected, however with growth in all of its major regions, and the company was at pains to maintain its full year outlook, with expectations for Q3 expected to see profits rise to $0.28c a share

Dow Jones is expected to open 42 points higher at 26,520

S&P 500 is expected to open 5 points higher at 2,943

DISCLAIMER: CMC Markets is an execution-only provider. The material (whether or not it states any opinions) is for general information purposes only and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed.

No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

Original Post

CMC Markets

Related Articles

Latest comments

Add a Comment
Please wait a minute before you try to comment again.
Discussion
Write a reply...
Please wait a minute before you try to comment again.

Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.

English (USA) English (India) English (Canada) English (Australia) English (South Africa) English (Philippines) English (Nigeria) Deutsch Español (España) Español (México) Français Italiano Nederlands Português (Portugal) Polski Português (Brasil) Русский Türkçe ‏العربية‏ Ελληνικά Svenska Suomi עברית 日本語 한국어 简体中文 繁體中文 Bahasa Indonesia Bahasa Melayu ไทย Tiếng Việt हिंदी
Sign out
Are you sure you want to sign out?
NoYes
CancelYes
Saving Changes

+

Download the Investing.com App

Get free real time quotes, charts and alerts on stocks, indices, currencies, commodities and bonds. Get free top of the line technical analysis/predictors.

Investing.com is better on the App!

More content, faster quotes and charts, and a smoother experience is available only on the App.

';