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Here's Why Investors Should Give Ryanair (RYAAY) a Miss Now
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Ryanair Holdings (RYAAY - Free Report) is currently mired in multiple headwinds, which we believe, have made it an unimpressive investment option.
Let’s delve deeper.
An Underperformer: The Ryanair stock has declined 15.1% year to date compared with its industry’s 9.3% fall in the same time frame.
Image Source: Zacks Investment Research
Weak Zacks Rank and Style Score: Ryanair currently carries a Zacks Rank #5 (Strong Sell). Moreover, RYAAY’s current Momentum Style Score of F shows its short-term unattractiveness.
Southward Earnings Estimate Revisions: The Zacks Consensus Estimate for current-quarter earnings has been revised 41.9% downward over the past 60 days. For the current year, the consensus mark for earnings has moved 12.9% south in the same time frame. The unfavorable estimate revisions indicate brokers’ lack of confidence in the stock.
Bearish Industry Rank: The industry to which Ryanair belongs, currently has a Zacks Industry Rank of 154 (of 250 plus groups). Such an unfavorable rank places RYAAY in the bottom 39% of the Zacks industries. Studies show that 50% of a stock price movement is directly related to the performance of the industry group it belongs to.
A mediocre stock within a strong group is likely to outclass a robust stock in a weak industry. Therefore, reckoning the industry’s performance becomes imperative.
Other Headwinds: Ryanair is being hit by lower average fares (down 27% year over year in fiscal 2022 (ended Mar 31, 2022) due to coronavirus concerns and the Russian invasion of Ukraine. This is limiting top-line growth. RYAAY expects fares to continue to be suppressed over the near term.
Additionally, escalating fuel prices (up more than 200% year over year in fiscal 2022) pose a threat to Ryanair’s bottom line. Total operating expenses rose more than 100% year over year in fiscal 2022, with a substantial increase in airport and handling charges, among other costs.
Airline Stocks to Consider
Investors interested in the Zacks Airline industry may consider stocks like Delta Air Lines (DAL - Free Report) , SouthwestAirlines (LUV - Free Report) and AlaskaAirGroup (ALK - Free Report) .
Improved air-travel demand, particularly on the domestic front, is aiding Delta. Anticipating travel-demand to increase further, DAL provided a bullish outlook for the second quarter. DAL expects revenue recovery to accelerate to 93-97% in the second quarter, with unit revenues likely to rise in double digits from the second-quarter 2019 tally.
Delta expects to generate a strong free cash flow in the June quarter. DAL currently sports a Zacks Rank #1. The positivity surrounding the stock is evident from the Zacks Consensus Estimate for current-year earnings being revised 71.6% upward over the past 60 days. DAL has a Growth Style Score of B.
Continued recovery in air-travel demand bodes well for Southwest Airlines. Anticipating a steady improvement in bookings, the carrier expects to reap profits in the remaining three quarters of 2022 as well as for the full year. LUV's management predicts operating revenues to increase 8-12% in the second quarter of 2022 from the comparable period’s level in 2019. LUV is seeing strong bookings for spring and summer travel.
Southwest Airlines currently sports a Zacks Rank of 1. The positivity surrounding the stock is evident from the Zacks Consensus Estimate for current-year earnings being revised more than 100% upward over the past 60 days. Like DAL, LUV too has a Growth Style Score of B.
Like DAL and LUV, Alaska Air expects the air-travel demand scene to get brighter with the summer fast approaching. ALK’s management predicts a double-digit percentage increase in yield, unit revenues and the pre-tax margin in the June quarter from the second-quarter 2019 actuals. Moreover, driven by high passenger revenues, ALK expects to reap profits from the second quarter onward through 2022.
Alaska Air currently carries a Zacks Rank #2 (Buy). The air of optimism surrounding the stock is evident from the Zacks Consensus Estimate for current-year earnings being revised 38% upward over the past 60 days. ALK has a Growth Style Score of A.
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Here's Why Investors Should Give Ryanair (RYAAY) a Miss Now
Ryanair Holdings (RYAAY - Free Report) is currently mired in multiple headwinds, which we believe, have made it an unimpressive investment option.
Let’s delve deeper.
An Underperformer: The Ryanair stock has declined 15.1% year to date compared with its industry’s 9.3% fall in the same time frame.
Image Source: Zacks Investment Research
Weak Zacks Rank and Style Score: Ryanair currently carries a Zacks Rank #5 (Strong Sell). Moreover, RYAAY’s current Momentum Style Score of F shows its short-term unattractiveness.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Southward Earnings Estimate Revisions: The Zacks Consensus Estimate for current-quarter earnings has been revised 41.9% downward over the past 60 days. For the current year, the consensus mark for earnings has moved 12.9% south in the same time frame. The unfavorable estimate revisions indicate brokers’ lack of confidence in the stock.
Bearish Industry Rank: The industry to which Ryanair belongs, currently has a Zacks Industry Rank of 154 (of 250 plus groups). Such an unfavorable rank places RYAAY in the bottom 39% of the Zacks industries. Studies show that 50% of a stock price movement is directly related to the performance of the industry group it belongs to.
A mediocre stock within a strong group is likely to outclass a robust stock in a weak industry. Therefore, reckoning the industry’s performance becomes imperative.
Other Headwinds: Ryanair is being hit by lower average fares (down 27% year over year in fiscal 2022 (ended Mar 31, 2022) due to coronavirus concerns and the Russian invasion of Ukraine. This is limiting top-line growth. RYAAY expects fares to continue to be suppressed over the near term.
Additionally, escalating fuel prices (up more than 200% year over year in fiscal 2022) pose a threat to Ryanair’s bottom line. Total operating expenses rose more than 100% year over year in fiscal 2022, with a substantial increase in airport and handling charges, among other costs.
Airline Stocks to Consider
Investors interested in the Zacks Airline industry may consider stocks like Delta Air Lines (DAL - Free Report) , Southwest Airlines (LUV - Free Report) and Alaska Air Group (ALK - Free Report) .
Improved air-travel demand, particularly on the domestic front, is aiding Delta. Anticipating travel-demand to increase further, DAL provided a bullish outlook for the second quarter. DAL expects revenue recovery to accelerate to 93-97% in the second quarter, with unit revenues likely to rise in double digits from the second-quarter 2019 tally.
Delta expects to generate a strong free cash flow in the June quarter. DAL currently sports a Zacks Rank #1. The positivity surrounding the stock is evident from the Zacks Consensus Estimate for current-year earnings being revised 71.6% upward over the past 60 days. DAL has a Growth Style Score of B.
Continued recovery in air-travel demand bodes well for Southwest Airlines. Anticipating a steady improvement in bookings, the carrier expects to reap profits in the remaining three quarters of 2022 as well as for the full year. LUV's management predicts operating revenues to increase 8-12% in the second quarter of 2022 from the comparable period’s level in 2019. LUV is seeing strong bookings for spring and summer travel.
Southwest Airlines currently sports a Zacks Rank of 1. The positivity surrounding the stock is evident from the Zacks Consensus Estimate for current-year earnings being revised more than 100% upward over the past 60 days. Like DAL, LUV too has a Growth Style Score of B.
Like DAL and LUV, Alaska Air expects the air-travel demand scene to get brighter with the summer fast approaching. ALK’s management predicts a double-digit percentage increase in yield, unit revenues and the pre-tax margin in the June quarter from the second-quarter 2019 actuals. Moreover, driven by high passenger revenues, ALK expects to reap profits from the second quarter onward through 2022.
Alaska Air currently carries a Zacks Rank #2 (Buy). The air of optimism surrounding the stock is evident from the Zacks Consensus Estimate for current-year earnings being revised 38% upward over the past 60 days. ALK has a Growth Style Score of A.