Shares in the budget airline easyJet PLC (LON:EZJ) were the FTSE 100’s biggest casualty after it said it had been buffeted by security fears and the weak pound.
The net impact of these and other factors will be a hit to pre-tax profits, which are expected to be in the order of £490-£495mln for the year ended September (marginally below the consensus forecasts).
That represents a near 30% fall on 12 months earlier and marks the first time in seven years the budget airline’s earnings have gone into reverse.
Brokers are now taking their red pens to forecasts for 2017 given the rather bearish outlook statement presented by easyJet, which is led by Carolyn McCall.
Numis analyst Wyn Ellis has knocked £95mln from his profit prediction, which now stands at £400mln.
He rates the shares ‘hold’ and thinks they are worth £10 each. The shares tumbled 54p to 949p in the wake of the latest turbulence.
Cantor Fiztgerald’s Robin Byde, sees “good value” in the stock at current levels, given it is changing hands for a cheap-as-chips nine-times 2017 earnings. It also boasts a very chunky 5.2% dividend yield.
His price target is £13 a share - which suggests plenty of upside from the current depressed levels.
“We expect consensus forecasts for full-year 2017 to be trimmed by 5%-10%,” Byde said in a note to clients.
“Despite these head winds, the fundamentals of easyJet remain sound and 2016 was impacted by some exceptional events.”
Earlier the carrier said the fall in the pound has cost £35mln in “adverse exchange rate movements” since the June 23 Brexit vote, bringing the currency-related impact on results to £90mln in the year ended September.
The total expected foreign exchange cost for the company for the 12 months just started is put at £90mln.
“The current environment is tough for all airlines, but history shows that at times like this the strongest airlines become stronger,” said CEO McCall.
“That is why we will continue to invest for the long term success of the business, establishing even stronger market positions, delivering excellent customer service and establishing new revenue opportunities for the future."