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Ryanair (RYAAY) Down 31% in a Year: What Led to the Drop?

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Due to multiple headwinds, shares of Ryanair Holdings plc (RYAAY - Free Report) have lost 30.5% in a year’s time compared with the industry’s decline of 7.9%.

Reasons for Dismal Performance

Escalating fuel costs are anticipated to dent Ryanair’s bottom line. The company apprehends fuel bill to rise by more than €460 million in fiscal 2019 (ending Mar 31, 2019) from fiscal 2018 figure. The significant increase is expected to be a major drag on earnings. Moreover, labor costs are also anticipated to increase on ratification of the recently inked labor deal with the Irish pilots, thereby weighing on the bottom line. Investments on its fleet are also raising costs.

Moreover, the company is concerned about a Brexit-related impact. Ryanair anticipates that U.K. shareholders will be treated as non-EU. Recently, U.K. prime minister Theresa May and her cabinet approved a Brexit deal with the European Union (EU). The U.K. is set to leave the EU on Mar 29, 2019. The company further apprehends that the Open Skies agreement might not be operational after 2020

Furthermore, Ryanair's labor agitation continues to cause numerous flight cancellations that are hampering bookings. In the previous week, infuriated passengers lodged complaints against the carrier for charging them fines. The customers could not check in online due to website failure. Persistent labor unrest, high costs and other headwinds are expected to hurt the company’s results.

Additionally, the stock’s valuation is not attractive. The company’s trailing 12-month price-to-book ratio of 3.1 compares unfavorably with the industry’s figure of 2.5.

Bearish Readings & Zacks Rank

The negativity around the stock can be gauged from the Zacks Consensus Estimate being revised 26.5% downward in the past 60 days for current-quarter earnings.

Ryanair carries an unimpressive VGM Score of C. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of all three scores.

The bearish Zacks Rank #5 (Strong Sell) carried by Ryanair reflects these headwinds. The unfavorable rank implies that investors should get rid of the stock from their respective portfolios. In fact, stocks with a Zacks Rank #4 (Sell) or 5 are likely to underperform the broader market over the next one to three months.

Stocks to Consider

A few better-ranked stocks in the Zacks Transportation sector are CSX Corporation (CSX - Free Report) , Norfolk Southern Corporation (NSC - Free Report) and Hertz Global Holdings, Inc. (HTZ - Free Report) . While Norfolk Southern and Hertz Global carry a Zacks Rank #2 (Buy), CSX sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of Norfolk Southern, Hertz Global and CSX have gained 7.1%, 12.1% and 7.9% in the past six months, respectively.

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