Tuesday preview: EasyJet to report first half loss, analysts estimate

EasyJet is expected to report a half year loss, reflecting the impact of terrorist attacks in Europe and foreign exchange headwinds.

Terrorist attacks in Egypt and Paris deterred travellers in the first quarter, with the airliner reporting a 3.7% drop in revenue per seat during the period. In the second quarter, analysts estimate another terrorist attack in Brussels may have also put a dent in EasyJet’s performance.

In its first quarter trading update EasyJet also warned that exchange rate movements were likely to have cut into profits by £25m in the first half.

“The first half is traditionally a seasonally weak trading period for EasyJet and in the first half of 2015 (1H15) the company reported a rare profit (1H15 pre-tax profit of £7m versus a 1H14, loss of £53m) and we expect that the extraordinary events in H1, when combined, with the negative currency impact will mean that the company again swings into loss,” Numis said.

“The trading outlook for the summer remains key, though. Comparatives are tough, given the poor UK summer weather in financial year 2015 and the strength of Sterling which helped to boost demand for beach routes, but we believe that the outlook for Summer 2016 is also encouraging: Sterling has strengthened recently and vacation demand appears to be focused on destinations such as Spain, the Balearics, the Canaries and Portugal, which are strong network points for EasyJet.”

Numis expects the company to report a pre-tax loss of £15m, compared to a profit of £7m the previous year.

The broker, however, said it remained “positive” on the structural growth opportunities for EasyJet. Numis also expects the interim results will be accompanied by chief financial offer Andrew Findlay's review of costs and EasyJet's funding and balance sheet metrics.

“In our view the latter will provide scope for a special dividend and/or an increase in the pay-out ratio.”

Ahead of the interims, RBC Capital Markets upgraded EasyJet to ‘outperform’ from ‘underperform’ and lifted the price target to 1,500p from 1,450p.

It said the drop in the shares – which are down 16% versus the FTSE 100 year-to-date – is a good entry point.

In economic data, China inflation data will be in focus. Analysts expect the consumer price index will remain at 2.3% growth in April.

“Prices of fresh vegetables have declined further over the month, although the year-over-year gain remains strong due to a low base from 2015,” HSBC said in a note to investors.

“Meanwhile, pork prices remain at relatively elevated levels.”

The producer price index is expected to drop 3.7% in April following a 4.3% decrease in March, on the back of recovering commodity prices.

Tuesday 10 May

INTERIMS
Cambria Automobiles, easyJet

INTERNATIONAL ECONOMIC ANNOUNCEMENTS
Balance of Trade (GER) (07:00)
Current Account (GER) (07:00)
Industrial Production (GER) (07:00)
Wholesales Inventories (US) (15:00)

GMS
European Assets Trust

FINALS
Gear4music (Holdings), Maxcyte (DI/Reg S), Quantum Pharma

ANNUAL REPORT
Cairn Homes

IMSS
Bovis Homes Group, Grafton Group Units

AGMS
Anglo Pacific Group, Bovis Homes Group, British Polythene Industries, Cairn Homes , Capita, Capital & Regional, Cello Group, Grafton Group Units, Greggs,
Interserve, Juridica Investments Ltd., Macfarlane Group, Michelmersh Brick Holdings, Ophir Energy, OptiBiotix Health, Patagonia Gold, Plus500 Ltd (DI),
Publishing Technology, Spirax-Sarco Engineering, Worldpay Group (WI), X5 Retail Group NV GDR (Reg S)

TRADING ANNOUNCEMENTS
Capita, Hiscox Limited (DI)

UK ECONOMIC ANNOUNCEMENTS
Balance of Trade (09:30)
BRC Sales Monitor (00:01)

FINAL DIVIDEND PAYMENT DATE
Equiniti Group , Sanne Group

Q1
Bank Pekao SA GDS (Reg S), Nokia OYJ