Broker snap: Citi upbeat about full-year profits at easyJet

1st Oct 2013 15:01

Shares of budget airline easyJet were flying higher on Tuesday after some upbeat comments from Citigroup ahead of its fourth-quarter trading update on Thursday.Citi maintained its 'buy' rating and 1,600p target price for the stock, saying that its valuation - shares trading at 12-13.5 times next year's earnings - is "not that demanding".The US bank said that it expects easyJet to deliver full-year profits "near the upper end of previous guidance" when it releases its full-year results in November.The company in July guided to a profit before tax (PBT) of £450-480m for the 12 months ended September 2013; Citi stands a little ahead of consensus forecasts at £474m (consensus: £471m). If this proves to be the case, PBT would be around 50% higher than the £317m reported the year before."A slightly weaker euro and good weather in Northern Europe could have weakened revenue slightly but this is likely to have been offset by the recent weakness of the US dollar. These currency impacts are likely to have been small, however, due to extensive hedging already in place," the bank said.Revenue per seat in the final quarter is expected to have increased by 6%, a similar rate as the third quarter and in line with guidance for the second half.As for the outlook, Citi said that forward bookings are expected to in line with the previous year with a third of seats already sold in the first quarter of the current fiscal year (ending September 2014)."There could be some risk to this outlook, however, based on good weather in August negatively affecting bookings for the September to November period, as already forewarned by Ryanair in early September. We note, though, the deterioration in weather in northern Europe since early September."The bank also said there could be more competitive capacity, perhaps from Norwegian, Ryanair and Vueling, negatively affecting pricing this winter. The stock was up 3.21% at 1,319p before the close on Tuesday.BC