Ryanair Holdings RYAAY failed to achieve its targeted traffic of 154 million for fiscal 2020 due to the coronavirus-induced travel-demand slump. It was close to the target even as late as March. Nevertheless, the airline’s fiscal 2020 traffic of 149 million (up 4% year over year) is encouraging given the low capacity from the grounding of the more fuel-efficient B737 MAX jets and the coronavirus outbreak.
Ryanair’s stringent cost-cutting measures support its growth potential. The company reduced its average weekly cash burn rate to around €60 million in May, from approximately €200 million in March.
The carrier’s expansion initiatives fortify its global presence. For instance, in 2019, the airline acquired Malta Air — a start-up carrier. Malta Air’s fleet consists of around 120 aircraft. Since becoming part of Ryanair, the airline has been able to establish a strong presence in France, Germany, Italy and Malta. In 2018, Ryanair purchased the Austrian airline Laudamotion. Once the virus concerns stabilize, we expect the carrier to resume its expansion efforts.
With a sound financial position, Ryanair should be able to come off the crisis strong enough. Notably, the carrier’s cash and cash equivalents at the end of fiscal 2020 was €2.57 billion, way above the short-term debt figure of €382.3 million, implying that the company has enough cash to meet its short-term debt burden.
With easing coronavirus-led travel restrictions, shares of Ryanair have surged more than 48% in a month’s time. The carrier has been seeing a rise in flight bookings lately. Last month, the airline’s CEO Michael O'Leary stated that there is a “big surge in bookings” on its flights out of Ireland and the UK to Spain, Portugal and Italy.
Given these positives, we believe the time is ripe for investors to add the Ryanair stock to their portfolio, as is suggested by its Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some better-ranked stocks in the broader Transportation sector are Scorpio Tankers Inc. STNG, Teekay Tankers Ltd. TNK and Frontline Ltd FRO. While Scorpio Tankers and Frontline sport a Zacks Rank #1, Teekay Tankers carries a Zacks Rank #2.
The Zacks Consensus Estimate for Scorpio Tankers’ current-year earnings has been revised upward in excess of 100% in the past 60 days.
The Zacks Consensus Estimate for Teekay Tanker’s current-year earnings has been revised 35.6% upward in the past 60 days.
The Zacks Consensus Estimate for Frontline’s current-year earnings has been revised 17.1% upward in the past 60 days.
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Ryanair Holdings PLC (RYAAY) : Free Stock Analysis Report
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