Ryanair's earnings forecasts cut
Merrion have cited concerns that demand has been less responsive to lower ticket prices than anticipated. Photo: Bloomberg
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The pressure on Ryanair to slash its fares in order to fill seats has prompted some analysts to cut their earnings forecasts and ratings for the airline.
Ryanair warned on Monday that price competition resulting in lower yields would result in full-year profit for the fiscal 2010 period at the lower end of a previously signalled €200m to €300m range.
Yesterday, Merrion Stockbrokers analyst John Mattimoe cut his rating on Ryanair stock to 'hold' from 'buy', citing concerns that demand has been less responsive to lower prices than he anticipated.
Ryanair said on Monday that its average fares fell 13pc during the last quarter compared to the same three months last year, while passenger numbers were 11pc higher at 16.6 million.
Noting that visibility is "extremely poor", Mr Mattimoe said that the downturn is having a greater impact on Ryanair's yields and earnings than he previously expected.
"Demand is significantly less responsive to price promotion, exacerbated by Ryanair's own pace of capacity growth at a time of consumer weakness," he added.
Mr Mattimoe cut Merrion's forecast yield decline at Ryanair to 21pc, in line with the airline's own guidance on Monday, from 15pc. He said that with earnings highly sensitive to yields, the impact on forecasts is "significant".
Merrion's forecasts now imply earnings per share for the 2010 financial year of 16.7 cent, a 38pc reduction on previous estimates.
Price target
Goodbody Stockbrokers analyst Eamonn Hughes yesterday cut his 12-month price target on Ryanair stock by 6pc to €3.95, and forecast full-year earnings per share would fall by 18pc or 19.4 cent.
Mr Hughes said that while Ryanair is pressurising competitors, he remains wary of even the most cautious yield figures guided by the airline.
"Nevertheless, the fact that the seasonally important second quarter yield could be down by near 20pc and ancillaries growth per passenger is anaemic, all point to a faltering consumer," he added.
Davy Stockbrokers analyst Stephen Furlong maintained his 'outperform' rating on the stock, although he also cut his earnings estimates to reflect Ryanair's own forecasts. He also maintained his €4 12-month price target.
Shares in Ryanair closed up 4.7pc, 14 cent, in Dublin to close at €3.22. That clawed back some of the heavy Monday losses.
- John Mulligan
