Broker snap: easyJet guidance should reassure investors, says Jefferies

23rd Jan 2014 09:19

Jefferies has kept a 'buy' rating and 1,620p target price for budget airline easyJet, saying that first-half guidance should reassure investors after a subdued first quarter.Nevertheless, despite its positive stance the broker said it prefers sector peer Ryanair over easyJet.easyJet is guiding to a £70-90m pre-tax loss for the six months to March 31st, down from a £61m loss for the first half the previous year, given that Easter falls in April this year. The company said that Easter fell on March 31st in 2013 which resulted in £25m additional revenue in the first half."At the mid-point this is c£20m worse than last year which mostly reflects adverse Easter timing (£25m of revenue). This has been well flagged but given some had feared a three-digit number, should be reassuring," Jefferies said.The broker said that bottom-line consensus forecasts could "nudge up a little as low-end estimates are worked through".Nevertheless, Jefferies admitted that revenue per seat growth of just 1.4% was "lacklustre", as expected, with the previous year's results benefitting from a "post-Olympic boost"."That this level is expected to continue into 2Q may be seen as a little disappointing by bears of the stock," the broker said.Meanwhile, cost guidance was slightly better than expected, with constant-currency costs excluding fuel expected to rise by just 1.5% in the first half and by 1.5-2% for the full year, down from initial estimates for 2% growth.Jefferies said: "We are confident in EZJ sustaining profitable growth, with initiatives to broaden the appeal to a wider customer base. Business passenger growth of 8.9% in the quarter is encouraging. But we see more upside at Ryanair [rated 'buy'] where self-help catalysts are emerging."easyJet was trading down 2.4% at 1,701p by 09:56 on Thursday.BC