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Here's Why Ryanair (RYAAY) is Down Since Q1 Earnings Release

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Ever since Ryanair Holdings’ (RYAAY - Free Report) first-quarter fiscal 2020 (ended Jun 30, 2019) earnings released on Jul 29, its shares have decreased 5.5%, despite the company reporting better-than-expected results.



The company’s earnings of $1.20 per share (€0.21) beat the Zacks Consensus Estimate of $1.14. However, the bottom line declined year over year due to low air fares and high costs. Meanwhile, revenues increased year over year to $2.6 billion (€2.3 billion), which was also marginally above the Zacks Consensus Estimate. The top line benefited from rise in traffic.

Results in Detail

Ryanair’s first-quarter fiscal 2020 profits saw a drop of 21% to €243 million on account of 6% fall in average air fares and 19% increase in costs (fuel costs jumped 24%). Unit costs excluding fuel rose 4% due to consolidation of the LaudaMotion unit and higher labor costs among other factors.

Meanwhile, traffic during the quarter ascended 11% to 42 million while load factor was flat at 96%. The carrier returned approximately €100 million to shareholders during the reported quarter.

As of Jun 30, 2019, capital expenditures totaled €389.6 million. Net debt at the end of the quarter was reduced to €419.3 million from €449.5 million as of Mar 31, 2019.

Fiscal 2020 Outlook

The company still anticipates fiscal 2020 profit after tax (PAT) to be flat year over year within €750-€950 million. Meanwhile, fares are expected to be approximately 6% lower in the second half of the year. Based on this, fiscal 2020 air fares are estimated to either decline up to 2% or increase up to 1%. Additionally, traffic is now predicted to increase 7% to more than 152 million, down from an 8% climb, anticipated previously. The downside is due to delivery delays from the Boeing MAX groundings. Fuel costs are anticipated to escalate by €450 million while non-fuel unit costs are expected to inch up 2%.

This overall disappointing performance and the bleak fiscal 2020 outlook caused the company’s shares to dive.

Zacks Rank & Key Picks

Ryanair carries a Zacks Rank #5 (Strong Sell).

Some better-ranked stocks in the same space are Delta Air Lines (DAL - Free Report) , Gol Linhas Aereas Inteligentes (GOL - Free Report) and JetBlue Airways Corporation (JBLU - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of Delta, Gol Linhas and JetBlue have rallied more than 15%, 51% and 17%, respectively, so far this year.

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