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EasyJet leads FTSE 100 fallers on outlook worries

Discussion in 'Market News' started by Lily, Sep 14, 2016.

  1. Lily

    Lily Forum Member

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    Analysts at Barclays cut price target and warn on trading uncertainty

    EasyJet is leading the FTSE 100 fallers on concerns about the outlook for the budget airline.

    Its shares are down 24p or 2% at £11.10 after analysts at Barclays cut their target price from £11.50 to £10.50 with an equalweight rating. They said:

    Given uncertainty around UK trading and the European geopolitical climate, visibility for the winter and 2017 is particularly low. On balance we think 2017 earnings will slip backwards as easyJet maintains its 8-9% growth rate, prioritising long term strategic opportunities over short term yields. Cash generation for the next few years will likely be poor, although the dividend is secure...

    Ever since the Sharm-el-Sheikh Metrojet bombing at the end of October 2016, it seems like easyJet has faced one demand shock after another (Paris, Brussels, Egyptair, Nice, Turkey, Brexit). The company is on track to record the worst year for yields in its history, and the situation has been compounded by operational challenges this summer including Gatwick congestion, extreme weather and French air traffic control strikes. All told, we believe external events have cost easyJet at least £150m in 2016.

    Although there are short term uncertainties (UK winter trading, pension agreement pending), we are confident that ongoing structural cost savings, alongside capital expenditure flexibility, will enable IAG to continue growing earnings per share, margins and free cash flow in 2017 and meet its medium term targets. We see the upcoming Capital Markets Day as a key positive catalyst, with potential cash returns.

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