The City is upbeat on Ryanair Holdings PLC (LSE:RYA) despite CEO Michael O’Leary’s European budget airline lowering its profit guidance for the year ahead.
In Monday’s third-quarter trading update, the carrier reported a net profit of €15 million (£12.8 million), marking a dramatic 93% year-on-year reduction from €211 million as higher fuel costs bit into the bottom line.
Profit after tax forecasts for the full year were subsequently lowered to the bottom range between €1.85 billion and €1.95 billion due to higher costs.
Despite this, RBC upped its share price guidance from €23 to €24 and Barclays from €25 to €26.
The latter was particularly surprising, given Barclays analysts said that costs, traffic and revenues “all disappointed”, while the 2024 outlook “seems poor”.
UBS has the same sentiment on costs, though it too remained generally bullish with an unchanged price target of €26.
JPMorgan Chase & Co (NYSE:JPM, ETR:CMC) called it a “bumpy quarter” while keeping forecasts at €28.5, while Deutsche Bank kept its target unchanged at €26.
What exactly is keeping market sentiment afloat?
According to Barclays, Ryanair’s fortunes are likely to pick up after weathering the current storm, with 2025 guidance on fuel costs, revenues and traffic looking “encouraging”.
RBS went into greater detail, stating that Ryanair has outperformed peers with its low unit cost and low-fare model, which has also resulted in the highest margins.
“Whilst we see Ryanair as a lower risk share than airline peers (due to its balance sheet and more certain growth prospects), we expect Ryanair to continue to offer attractive risk-reward within the airline sector,” said RBS.
On a peer-to-peer comparison, Ryanair is the “clear leader” on a cost-per-passenger basis, beating Wizz Air as the next lowest-cost major European airline on handling, maintenance, staffing and other costs.
Ryanair is also being savvy with its aircraft acquisitions with the scheduled delivery of the B737-8200 'Gamechanger' aircraft, which contain 4% more seats, but burn 16% less fuel than the previous model.
Ryanair has agreed to purchase 300 new Boeing 737-MAX-10 aircraft between 2027 and 2033, which have greater fuel and carbon-efficiency standards.
Ryanair shares are currently swapping for €19.45.