easyJet plc (EZJ.L) | Investment Case

1. Company Snapshot

1.a. Company Description

easyJet plc operates as an airline carrier primarily in Europe.It also leases aircrafts, as well as operates tours; and provides financing services.As of September 31, 2021, the company operated 927 routes with approximately 308 aircrafts in 34 countries; and 153 airports.

It sells seats through its own website www.easyjet.com and its easyJet Worldwide' platform, its mobile application, global distribution systems, corporate online booking tools, content aggregators, and tour operator.easyJet plc was founded in 1995 and is headquartered in Luton, the United Kingdom.

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1.b. Last Insights on EZJ

easyJet's recent performance has been impacted by a shifting narrative among analysts, with its fair value target trimmed from £6.59 to £6.46 per share. A potential takeover bid from MSC has sparked interest, driving shares up. The UK's economic landscape, marked by weak trade data from China and a rising unemployment rate, has presented challenges. Despite this, the company's completion of modern navigation software rollout and analyst updates signal a nuanced outlook. Uncertainty surrounds the potential takeover bid.

1.c. Company Highlights

Last Price	489.7
Change Percentage	0.10%
Open	491.5
Previous Close	489.2
Market Cap ( Millions)	3677
Volume	1933343
Year High	594
Year Low	401.05
M A 50	477.38
M A 200	497.39

FCF Yield	23.45%
Dividend Yield	2.47%
ROE	14.65%
Debt / Equity	124.34%
Net Debt / EBIDTA	105.95%
Price To Book	1.39
Price Earnings Ratio	8.93
Price To FCF	4.27
Price To sales	0.38
EV / EBITDA	4.1

2. easyJet's Earnings Report: A Strong Performance Across the Board

easyJet reported a 9% increase in profit before tax (PBT) to GBP 665 million, with earnings per share (EPS) coming in at 1.04, in line with analyst estimates. Revenue growth was robust, driven by a strong performance in the holidays segment, which saw a 20% increase in packaged holiday customers and a 32% increase in profit. The company's return on capital employed (ROCE) improved to 18%, up from 13% previously, indicating a more efficient use of capital.

Publication Date: Nov -29

                                    📋 Highlights
                                    Profit Growth::
                                                9% increase in profit before tax (PBT) to GBP 665 million, marking the third consecutive year of earnings growth.
EBIT Improvement::
                                                Operational EBIT rose 18%, driven by GBP 56 million from holidays and GBP 50 million from the airline segment.
Holidays Segment Success::
                                                Profit surged 32% to GBP 250 million, with 20% growth in packaged holiday customers and early achievement of medium-term targets.
Balance Sheet Strength::
                                                Net cash improved to GBP 602 million, with owned assets reaching GBP 4.8 billion and a target of GBP 7.5 billion by 2028.
Return on Capital Employed (RoCE)::
                                                Increased to 18% from 13%, reflecting stronger capital efficiency and asset utilization.

                                

Operational Highlights

The company's operational performance was strong, with EBIT improving by 18%, driven by a GBP 56 million improvement in holidays and GBP 50 million in the airline segment. The holidays segment reached its medium-term target of GBP 250 million ahead of schedule, and the company is now targeting GBP 450 million by 2030. The airline segment is also benefiting from upgauging its fleet, with a expected GBP 3 per seat benefit, 60% of which is expected to be delivered by 2028.

Balance Sheet Strength

easyJet's balance sheet position has improved significantly, with owned assets increasing to GBP 4.8 billion and net cash improving to GBP 602 million. The company expects to increase its owned asset position to over GBP 7.5 billion by 2028, indicating a strong commitment to investing in its business. The reduction in ownership costs linked to buybacks has also been taken into account for next year, with a focus on reducing costs and improving profitability.

Valuation and Outlook

With a P/E Ratio of 9.1 and an EV/EBITDA of 4.16, easyJet's valuation appears reasonable, considering its strong earnings growth and improving profitability. The company's ROE of 14.65% and ROIC of 6.16% also indicate a strong return on equity and invested capital. Analysts estimate revenue growth of 7.9% for next year, and with a strong late booking trend and improving pricing environment, easyJet is well-positioned for continued growth.

Challenges Ahead

Despite the strong performance, easyJet faces challenges in reducing losses during the winter season, due to increased capacity and competition. However, the company remains confident of delivering its GBP 1 billion target and is working to improve its Q1 performance, with new winter destinations and the maturation of existing routes. The company's focus on cost reduction and improving productivity will also help to drive profitability.