The uptick in air-travel demand bodes well for Ryanair Holdings RYAAY. However, escalated fuel costs, a primary headwind, are limiting its bottom-line growth.
Factors Favoring RYAAY
The improvement in air-travel demand following the easing of COVID-related restrictions is a huge boon for Ryanair, which currently carries a Zacks Rank #3 (Hold). In first-quarter fiscal 2023 (ended Jun 30, 2022), the number of passengers who flew on RYAAY planes were 45.5 million, up 461% year over year. Air traffic in the quarter was 9% more than the pre-COVID levels. Load factor (% of seats filled by passengers) was 92% compared with 73% a year ago.
Continuing the trend, the number of passengers ferried on RYAAY flights in August registered a record figure. In fact, this was the fourth successive month wherein passenger volume touched the maximum at RYAAY.
In August 2022, RYAAY flew 16.9 million passengers compared with 11.1 million passengers transported by RYAAY last August. Load factor increased to 96% from 82% in August 2021. The number of passengers attracted by RYAAY in August 2022 was 14.2% higher than the 14.9 million passengers flown in August 2019 (pre-coronavirus era). Ryanair aims to increase its traffic in fiscal 2023 to 165 million, indicating 11% growth from the pre-COVID traffic numbers.
Ryanair’s measures to expand its fleet to cater to the improvement in travel demand are encouraging. Efforts to lower its debt levels are commendable too. Net debt at RYAAY declined to €0.4 billion at the end of the first quarter of fiscal 2023 from €1.45 billion at the end of the fourth quarter of fiscal 2022.
Escalating fuel costs pose a threat to Ryan Air’s bottom line. In the fiscal first quarter, operating costs surged 250% year over year, induced by a 560% increase in fuel expenses. Moreover, low average fares amid coronavirus concerns might hurt the airline’s top line. During the first quarter of fiscal 2023, average fares at RYAAY declined 4% year over year due to coronavirus-led woes and the Russian invasion of Ukraine.
Stocks to Consider
Some better-ranked stocks in the Zacks Transportation sector are SkyWest SKYW, GATX Corporation GATX and C.H. Robinson CHRW .
Continued recovery in air-travel demand bodes well for SkyWest. With better air-travel demand, SKYW carried 32.7% more passengers in first-half 2022 than the year-ago level. As a result, the passenger load factor (percentage of seats filled by passengers) expanded 1450 basis points to 82.1% in first-half 2022.
SKYW’s fleet-modernization efforts are commendable as well. The bullishness surrounding the stock is evident from the Zacks Consensus Estimate for current-year earnings being revised above 100% upward over the past 60 days. SkyWest has a Momentum Style Score of B. SKYW currently sports a Zacks Rank #1 (Strong Buy).
You can see the complete list of today’s Zacks #1 Rank stocks here.
Based in Chicago, IL, GATX is a global railcar lessor with owned fleets in North America, Europe and Asia. Improvement in the North American railcar leasing market is expected to continue driving its growth.
Shares of GATX have gained 6% in a year’s time. The Zacks Consensus Estimate for GATX’s 2022 earnings has been revised 2.1% upward in the past 60 days. GATX currently carries a Zacks Rank #2 (Buy).
C.H. Robinson is being aided by an improving freight scenario in the United States. Efforts to control costs also bode well. Measures to reward CHRW's shareholders instill confidence in the stock further.
CHRW has a pleasant earnings track record. The bottom line surpassed the Zacks Consensus Estimate in three of the trailing four quarters (missing the mark in the remaining one). The stock has witnessed the Zacks Consensus Estimate for 2022 earnings being revised 17.6% upward over the past 60 days. C.H. Robinson currently carries a Zacks Rank of 2.
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Ryanair Holdings PLC (RYAAY) : Free Stock Analysis Report
C.H. Robinson Worldwide, Inc. (CHRW) : Free Stock Analysis Report
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