Broker tips: Easyjet, Carnival
Analysts at RBC Capital Markets and Liberum both took a look at EasyJet after the budget airline's results on Tuesday, coming to slightly different conclusions about what the future holds for FTSE 100 constituent.
The low-cost carrier's headline profit before tax for the year ended 30 September came to £578m as revenues grew 17% to £5.9bn. EasyJet had indicated in a detailed pre-close update group that profits would come in between £570m and £580m.
Though it said EasyJet's next few months "will be bumpy", RBC reiterated its 'outperform' rating on the airline, noting that macro related fears regarding the UK's inevitable exit from the EU had been priced-in already.
RBC, which also stood by its 1,600p target price, said: "We think the next few months will be bumpy but offer opportunities for longer-term investors. On PER, easyJet shares trade at 10x 2018/19E PER – close to a ‘recession’ PER multiple."
Over at Liberum, the broker saw "no surprises" in EasyJet's full-year results as it reiterated its 'hold' rating and 1,250p target price.
Unlike RBC, Liberum wasn't convinced the uncertainty faced by easyJet in the short-term had been factored in, with the outcome and implications of Brexit no clearer than two years ago, cost pressure from sterling weakness and the risk that fuel prices could reverse their recent declines and resume an upward path.
Analysts at Credit Suisse bumped up their target price on cruise operator Carnival on Tuesday after "an encouraging update" with company management and a 'call' with its chief financial officer saw it "retain a positive view".
Credit Suisse said its conversation with CFO James Heaney, who joined Carnival from SeaWorld back in 2015, focused on five key topics.
According to the Swiss broker, Heaney said Carnival now sees "solid yield growth" throughout 2019, with trends versus peers better judged alongside return on invested capital.
Carnival's yield management system, an extending booking curve and continued adoption of its offerings by millennials also supported the investment case.
Credit Suisse also said that when discussing flexibility in a downturn, Heaney had noted scope for cost and capex adjustments in the near-term.
And while he also played down potential savings as a result of the new fuel regulations that were set to come into effect in 2020, the broker itself said it saw Carnival as being "well placed to benefit".
"We would expect caution to prevail and yield growth of around 1% seems likely (CSe 1.5%). The key downside risk stems for a combination of 6% industry capacity growth and a weaker consumer backdrop combining, although the 2019E PE of 12.8x seems to capture an element of that risk," the analysts said.
"Whilst 2019E guidance on 20 December will likely be cautious, we see a 2018-21E EPS CAGR of 12% vs a Nov-19E PE of 12.8x as a compelling combination on a 12-month view."
CS upped its target price on Carnival's shares to 5,910p from 5,770p, while keeping their recommendation at 'outperform'.