Ryanair profits will be higher than expected this year because of strong growth in passenger numbers, lower costs and the benefit of sterling earnings. Analysts are increasing their profit forecasts after an unexpected briefing by the company yesterday ahead of second quarter results due in about 10 days.
Ryanair shares jumped 30 cents to close at 920 after the briefing. Full-year profit forecasts for the airline will rise by 5 to 12 per cent.
At yesterday's briefing, Ryanair's chief executive, Mr Michael O'Leary, told analysts passenger volumes had been higher and costs lower than expected in the three months to the end of September. The company also benefited from the continued strength of sterling, he said. Ryanair is due to announce its second quarter figures on November 7th.
Mr O'Leary reported a 34 per cent rise in passenger traffic in the second quarter against a forecast 27 per cent increase. He attributed the stronger rise to the good performance of the airline's 10 new routes and the attraction of its Internet booking channel. Costs were lower because some 90 per cent of all bookings came through the Internet in the first six months, he said.
"As a result we now believe the consensus range of analysts' forecasts, which are predicting 34 per cent growth in after-tax profits for the second quarter, should be revised upwards. While the results for quarter two are still being finalised, based on preliminary results, we now feel that analysts' estimates of profit after tax growth should be in the mid-to-high 40 per cent range for quarter two and the mid-to-high 30 per cent range for the half year."
After the briefing, analyst Mr John Mattimoe of Merrion Stockbrokers increased his full-year earnings per share forecast to 27.1 cents from 24.1 cents and reiterated his buy recommendation on the shares, which he said were on track to reach his yearend target price of €11. He has increased his earnings growth forecast for next year to 23.5 per cent from 20 per cent.
NCB analyst Mr Shane Matthews said he would increase his current earnings per share forecast of 24.9 cents by at least 5 per cent. "Every 100,000 increase in passenger numbers adds 4 per cent to the bottom line. Ryanair is a high-growth company that is proving itself", he said.
But Mr O'Leary warned investors "not to get too carried away about this upgrade". While he expected passenger traffic and profits to continue to increase strongly, he said fuel costs would rise and sterling was "artificially" strong.
"The result for quarter two will be stronger than expected but we remain of the view that we will continue to grow in the medium-term future at our expected average rate of 25 per cent per annum."
