Credit Suisse sees profit recovery at Easyjet

Analysts at Credit Suisse upped their recommendation on shares of Easyjet from 'neutral' to 'outperform', telling clients that a recovery in profitability to the levels seen in 2013 and 2014 was on the cards.

The Swiss broker marked up its estimates for the company's revenues per seat, due to improved summer trends, from -2% and -4% for the third and fourth quarters of 2017, respectively, to -1% and -3%.

That drove a 7% increase in their estimate for the airline's 2017 profit before tax to £420.0m. Credit Suisse also raised its 2018 estimate for the company's profit before tax by 17% to £534.0m.

Combined, those revisions saw the analysts bump up their target price on the shares by 24% to 1,583p.

The analysts anticipated that market confidence in a return to 2013-2014 levels of profit before tax per seat of between £7 to £8 would build on the back of three factors: more moderate competitive growth, a normal winter (which would secure a recovery in 2018) and the existence of growth opportunities.

"Convergence with legacy competitor pricing is possible over time as carrier products harmonise, and following a 12% two year decline to 2017E, a 2%

pricing recovery in a healthy market would see 2013's £7 PBT per seat return."