easyJet plc (LSE:EZJ) is expected to fly back into the FTSE 100 at its latest reshuffle tomorrow, with Dechra pharma and Cineworld on the wrong end of the shake-up.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said the lifting of travel restrictions and February’s relaxation of testing requirements was the right medicine to combat Omicron dampening, with easyJet’s share price up 12.9% in the last month.
“The focus on short haul travel puts easyJet in a better position than its long haul rivals when it comes to capturing returning passengers.
“UK beach and leisure routes look set to benefit from pent up travel demand in the months to come as holiday-starved families seek out a temporary stint in the sun.”
But Streeter warned hastening tensions in Ukraine are likely to worry travel companies.
“If the Ukraine situation deteriorates it could be yet another setback in the far from easy path easyJet is attempting to follow to get back into the blue chip index.’’
Vet pharmaceutical company Dechra Pharmaceuticals PLC (LSE:DPH) could meet easyJet on its way out as shares fell 3.81% in the last month, despite strong earnings last year on the back of acquisitions and demand for pets.
But Streeter said inflationary pressures could deter spending this year.
“Dechra is in the business of keeping animals healthy throughout their lifetimes and although demand for the pharmaceutical company’s veterinary products has been strong, there is a risk that with incomes facing a squeeze from rising inflation spending per head could decline.”
Further down, Cineworld Group PLC (LSE:CINE) could fall out of the FTSE 250 index as its debt crisis piles higher.
The group reached a settlement with angry stakeholders last week over the price in the takeover of Regal Cinemas in 2019, while it is facing a big payout to Canadian chain Cineplex (TSX:CGX) after pulling out of a deal to buy the group during the early days of the Covid crisis.
“Spies and superheroes alone won’t be the secret weapon back to health given that Cineworld is now reeling from the punch delivered by the Supreme Court of Justice in Ontario which ruled in favour of the Cineplex (TSX:CGX) chain of cinemas in its legal battle against the company.”
Streeter said outsourcer Capita PLC (LSE:CPI) was a contender to leave the FTSE 250, while Clipper Logistics PLC (LSE:CLG) had the potential to enter the index but not for long as it has just received a bid from GXO.