There are two things which stand out from Easy jet’s earnings: disruption caused by drones & healthy forward bookings number. This future booking number is as robust as it can be- confirming the fact that the airline is cognisant of the Brexit chaos and it has the right policies to battle the event.
If you subtract the drone effect, it becomes clear that earnings are solid. The drone event was one of its kind, we do not think you can judge the company’s earning based on that. One just has to take that on the chin (£10 million loss) and move on from it.
The firm’s full-year profit expectations are in line with the market outlook and this is an inspiring sign for investors (given the chaos we are dealing in the midst of Brexit). Another example of Easy jet’s team executing things right comes from the fact that the company has improved its passenger number for the first quarter by improving the capacity. The passenger revenue soared by 12.1%, passenger number by 12.2% and the capacity by 18.2%. It clearly illustrates that the company is paying attention to the numbers which move the bottom line number.
Overall, the pessimism has injured the appetite for the riskier assets and this is mainly due to the IMF report in which it downgraded the global growth forecast. The report was released yesterday and the bank downgraded the global growth forecast to the feeblest point in three years. This brought investors back in the Japanese yen while Treasury yields moved lower.
In other words, investors are still under the influence of the IMF report. The outcome of the report is the reflection of Trump policies which have stalled the global economic growth. The tailwind comes from the fact that most of the central banks have pulled their support for the markets and adopted a hawkish stance. The economic numbers coming out of China confirms weakness and Trump taunting those numbers isn’t the way forward. China is never going to come to the table just because of that. In fact, it encourages the government to push the People Bank Of China to initiate more accommodative policies in order to spur the growth in the country.
Investors should not be so pessimistic because of the IMF report and perhaps look at the silver lining in other areas. For instance, Citi’s global earning revision index shows that the worst may be over for the companies which have been under the heavy influence of the strong dollar. If the Fed is no longer accommodative in terms of their monetary policy to support the market, their policies are not so favourable for the dollar index as well. Clearly, the dollar index is well off from its high and this could produce positive results for the US corporates in the future.