News Flash: 24 Analysts Think Ryanair Holdings plc (ISE:RY4C) Earnings Are Under Threat
Today is shaping up negative for Ryanair Holdings plc (ISE:RY4C) shareholders, with the analysts delivering a substantial negative revision to next year's forecasts. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.
After the downgrade, the consensus from Ryanair Holdings' 24 analysts is for revenues of €7.2b in 2021, which would reflect a chunky 16% decline in sales compared to the last year of performance. Statutory earnings per share are supposed to nosedive 46% to €0.50 in the same period. Prior to this update, the analysts had been forecasting revenues of €8.1b and earnings per share (EPS) of €0.82 in 2021. Indeed, we can see that the analysts are a lot more bearish about Ryanair Holdings' prospects, administering a measurable cut to revenue estimates and slashing their EPS estimates to boot.
View our latest analysis for Ryanair Holdings
Despite the cuts to forecast earnings, there was no real change to the €14.06 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. There are some variant perceptions on Ryanair Holdings, with the most bullish analyst valuing it at €18.50 and the most bearish at €9.63 per share. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. We would highlight that sales are expected to reverse, with the forecast 16% revenue decline a notable change from historical growth of 7.6% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 3.9% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Ryanair Holdings is expected to lag the wider industry.
The Bottom Line
The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on Ryanair Holdings after the downgrade.
A high debt burden combined with a downgrade of this magnitude always gives us some reason for concern, especially if these forecasts are just the first sign of a business downturn. To see more of our financial analysis, you can click through to our free platform to learn more about its balance sheet and specific concerns we've identified.
You can also see our analysis of Ryanair Holdings' Board and CEO remuneration and experience, and whether company insiders have been buying stock.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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