Ryanair: Oddo confirms rating and target price
(CercleFinance.com) - Oddo today confirms its “buy” rating on the Ryanair stock, along with its target price of 18 euros, despite current pressure with trade unions.
Oddo believes that while Ryanair has made significant progress in negotiations with the unions (signing of collective agreements in Italy and Ireland and recognition agreement in the UK - representing nearly 52% of the group's pilots), continued industrial action from pilots in Germany (9% of pilots) and the involvement of cabin crews - particularly in Portugal, Belgium, the Netherlands and Spain (strikes expected on 28 September), are maintaining pressure on company management and the share.
Analysts estimate the costs associated with the strikes over Q2 (more than 1000 flights were cancelled) at around 15 million euros. They remain cautious in their estimates and expect personnel costs to increase by 136 million euros on an annual basis (including a transition from 5.1x to 5.5x teams per plane and excluding growth).
In a worst-case scenario, which implies that Ryanair is aligned with easyJet's metrics in terms of productivity (moving from 5.5x to 6.5x teams per plane), the additional impact on EBIT would amount to 154 million euros over 2018/19, i.e. 11% of EPS, with a 1.5-euro impact on valuation per share, Oddo adds in its daily equity review.
Copyright (c) 2018 CercleFinance.com. All rights reserved.
The information and analyses distributed by Cercle Finance are only intended as decision-making support for investors. Cercle Finance's responsibility may not be entailed, either directly or indirectly following the use of such information and analyses by readers. Any non-professional investor is recommended to consult a professional advisor before making any investment decision. This indicative information in no way constitutes any invitation to sell or buy securities.
Oddo believes that while Ryanair has made significant progress in negotiations with the unions (signing of collective agreements in Italy and Ireland and recognition agreement in the UK - representing nearly 52% of the group's pilots), continued industrial action from pilots in Germany (9% of pilots) and the involvement of cabin crews - particularly in Portugal, Belgium, the Netherlands and Spain (strikes expected on 28 September), are maintaining pressure on company management and the share.
Analysts estimate the costs associated with the strikes over Q2 (more than 1000 flights were cancelled) at around 15 million euros. They remain cautious in their estimates and expect personnel costs to increase by 136 million euros on an annual basis (including a transition from 5.1x to 5.5x teams per plane and excluding growth).
In a worst-case scenario, which implies that Ryanair is aligned with easyJet's metrics in terms of productivity (moving from 5.5x to 6.5x teams per plane), the additional impact on EBIT would amount to 154 million euros over 2018/19, i.e. 11% of EPS, with a 1.5-euro impact on valuation per share, Oddo adds in its daily equity review.
Copyright (c) 2018 CercleFinance.com. All rights reserved.
The information and analyses distributed by Cercle Finance are only intended as decision-making support for investors. Cercle Finance's responsibility may not be entailed, either directly or indirectly following the use of such information and analyses by readers. Any non-professional investor is recommended to consult a professional advisor before making any investment decision. This indicative information in no way constitutes any invitation to sell or buy securities.