We have had an update today from Easyjet (EZJ) which I suggested as a trading buy back in June when it was trading under 1600p. They have today increased their profits guidance for this year by around 6 to 9% as they raised the range for expected pre tax profit from £620m - £660m to £675m - £700m.
This was despite the head winds from some one off costs that they highlighted earlier in the year. It comes on the back of record passenger numbers of over 7 million and a new record load factor of 94.4% for any month set this August. With the positive effects from lower oil prices and an offset from currencies still being broadly where they were this has led to the increased guidance.
This is likely to leave the shares on around 12x this years probable upgraded earnings which may then fall to around 11x for the year to September 2016. On the yield front the shares still offer around 3.5% which may also get edged up further if the upgrades lead to a higher dividend payout or they could consider another special dividend given the cash rich balance sheet. Thus although the shares are rapidly closing in on my original 1800p+ price target (1780p +6.5% today) they do still look reasonable value.
Trader types might want to think about taking profits if it does make it up to the 1800 -1900p range where the gap around 1830p from may lies and where resistance from previous peaks around 1900p will kick in. Otherwise Investors might want to stay on board as it seems like a well managed company trading at a reasonable valuation which is benefiting from recovering consumer incomes and lower costs on the back of lower oil prices. They are also gaining from the trend towards increased leisure travel being created by the low cost airlines themselves, although they do operate in a complex business with many variables which are often largely outside of their control. This can make profits quite variable and difficult to forecast in the short term but the trends have been strongly positive overall from this over the last five years.