Ryanair share price drops despite raised profit guidance and $400m share buyback
Ryanair's profits are flying, but the news failed to impress investors.
The figures
Ryanair has boosted its earnings outlook yet again, with profits expected to reach €840-850m (£630-638m) during the 12 months to 31 March 2015.
This is up from the €810-€830m (£610-625m) forecast issued less than two months ago on 4 December.
The company also posted a €49m (£37m) net profit for the three months to 31 December, exceeding third quarter expectations of €28m (£21m).
It said the improved outlook was due to greater passenger volume this year compared to the equivalent period in 2013-2014, and also lower fuel costs.
As a result, Ryanair is launching a buyback programme of €400m (£301m) shares, to be completed between February and August this year.
The news failed to impress investors, however, with shares going down by 4.6 per cent to €9.93 (£7.47) in morning trading, having been on an upward trajectory over the last six months.
Why it's interesting
The news will not come as much of a surprise to investors – the company has already upgraded its profit outlook three times for this financial year, most recently in November. At that time, Ryanair attributed the improved estimate to an image makeover.
In September 2014, it said passenger numbers grew four per cent, from nine million in August 2013 to 9.4m in the same month this year, pushing shares up 1.35 per cent in early trading.
It follows a blip during the equivalent period last year, when Ryanair posted an eight per cent fall in net income for 2013-2014. This was its first earnings decline in five years.
What Ryanair said
Despite the good news, the airline said investors should remain cautious because fuel price is hedged at $92 (£61) per barrel.
We would counsel shareholders and analysts to temper expectations for the next financial year. While we are still finalising our budget, we believe that any growth in profits will be modest as our fuel is hedged at $92 per barrel, whereas some competitors will be significant beneficiaries of lower oil prices and this may lead to downward pressure on airfares.
In short
The latest results are a continuation of a good spell for Ryanair, but this morning's share price drop reflects investors awareness of the limit placed by fixed fuel prices on Ryanair's good fortunes.