Proactive Investors – JPMorgan Chase (NYSE:) has laid down a positive outlook for the short-haul airline sector heading into the summer season, leading to an upgrade of easyJet (LON:) stock from ‘neutral’ to ‘overweight’.
The budget airline said its performance has improved year on year in its latest quarterly update, with booking trends giving a positive outlook for the remainder of the financial year.
Underlying trends in the quarter were strong, although headline results were impacted by the conflict in the Middle East.
The key takeaway from the low-cost carriers (LCCs)’ recent spate of results has been the encouraging early comments regarding demand and pricing moving into 2024.
“We took a cautious view due to capacity growth meeting elevated yields in an uncertain backdrop, but with a preference for the LCCs where we saw better opportunities to grow profitability amid more resilient pricing,” said analysts.
Reinforced by a bullish outlook on summer bookings yields, JPMorgan increased its easyJet profit-before-tax estimates for 2024-2026 by 26%, 20% and 16% respectively due to higher revenues.
As for Ryanair (LON:), the Irish carrier “remains the best ‘structural’ story in a commoditised industry… with a clear pathway to net income growth and large free-cash-flow generation”, said analysts, reiterating their ‘overweight’ rating.
Ryanair outlined a positive outlook in its third-quarter earnings call earlier this week, targeting approximately 183.5 million passengers for 2024.
However, it did narrow its profit after tax guidance to between €1.85 billion and €1.95 billion.
On Wizz Air (LON:), analysts said there were “continued uncertainty and questions over execution”, leaving the bank ‘neutral’ on the Hungarian carrier’s shares for now.
Though the airline flew a record 15.1 million passengers over the three months to December 2023, constraints from groundings, alongside disruption from the war in the Middle East, took their toll.
A €105.4 million loss was recorded for the period, compared to a €33 million profit last time around.
