With a resurgent consumer and flat oil prices, it has been a
pretty good time to be in the airline industry. Stock prices in
this segment of the transport space have soared, and many appear
well-positioned for 2014 gains as well.
However, while many airlines have seen strength, a few have fallen
by the wayside and could see their stocks grounded this year. In
Ryanair Holdings (
may be in trouble and could be a name to avoid in this otherwise
While Ryanair was still up significantly for 2013, but its
performance in the second half of the year has been terrible. The
stock has tumbled by over 12%, while many of its U.S. counterparts
saw some of their best gains in the past six month time frame.
The reason for this slump in the tail end of the year was largely
for its full year profit. Now, the company expects between EUR500
million and EUR520 million for the year, down from its previous
outlook of between EUR570 million- EUR600 million, as well as last
year's EUR 569.3 million.
Thanks to this reduced guidance, shares of RYAAY plummeted followed
the release, while analysts have also reduced their expectations
for the company's earnings as well. Add in worries over price
competition and concerns regarding the euro/pound exchange rate,
and Ryanair's outlook appears to be pretty bleak.
Ryanair Earnings Estimates in focus
Earnings estimates have fallen like a stone after the company's
bearish outlook, with the current quarter falling from 11 cents a
share 60 days ago to just two cents a share today. Meanwhile, the
full year estimate has dropped from $2.68/share 60 days ago to
With this drop, RYAAY looks to have an earnings contraction of
roughly 7.7% for the current year, though if estimates had remained
flat over the past two months, the earnings decrease would have
been less than 1% year-over-year.
And though the company is expected to rebound in the next year
period, competitive pressures are definitely building in the
European market, and if the euro continues to strengthen against
the pound it could hurt Ryanair's key British travel market.
With these factors in mind, it is pretty easy to see why Ryanair
has fallen to a Zacks Rank #5 (Strong Sell). And with this rating,
we are definitely looking for more underperformance from this
company-especially when compared to its high-flying peers-as we fly
further into 2014.
Other Picks and Bottom Line
Thanks to the strong consumer market and sluggish oil prices, many
other airlines have prospered in this environment and are still
well-positioned as top picks going forward. In fact, the airline
industry currently is in the top 11% for all industries, so there
are plenty of solid stocks for investors seeking an airline pick
While smaller airlines such as
Hawaiian Holdings (
JetBlue Airways (
Alaska Air Group (
all receive #2 ranks -both have also surged to #2s from #3s last
week-and are interesting selections, a trio of Chinese airlines
might actually be the way to go in this market.
That is because
Air China (
China Eastern (
China Southern Airlines (
, all receive a top Zacks Rank of #1 (Strong Buy), and were 'Holds'
just one week ago. Given this surge in their Zacks Rank to the top
echelon, any of these could be better selections than Ryanair which
could be headed for more turbulence this year, especially compared
to its top ranked counterparts in the space.
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