Investing.com -- Shares of Ryanair Holdings (IR:RYA) (NASDAQ:RYAAY) traded lower on Monday after the airline’s latest earnings report signaled moderate expectations for fare and passenger growth, despite in-line results for the first half of fiscal year 2024/25.
At 3:16 am (0816 GMT), Ryanair Holdings was trading 2.5% lower at €17.565.
Analysts at RBC Capital Markets noted that while Ryanair posted a half-year profit of €1.79 billion, a figure closely aligned with consensus estimates of €1.8 billion, investors were focused on signals of slower future growth, particularly in the wake of delivery delays and softer fare expectations for the third quarter.
The low-cost airline's earnings showed a mixed picture, with a decrease in average fares—down 10% for the first half, including a 15% drop in the first quarter and 7% in the second quarter.
Ryanair has warned that third-quarter fares will likely continue to soften, subject to close-in bookings as the quarter progresses.
RBC analysts said that while cost control remains a focal point, with unit costs expected to stay flat rather than increase as previously guided, any positive sentiment on this front was muted by tempered expectations around fare growth and traffic projections.
Revenue for the second quarter came in at €5.07 billion, a modest 3% increase, supported by a 9% bump in ancillary revenues and steady fuel costs.
However, despite this growth, the overall increase in operational expenses, which rose by 6%, narrowed Ryanair's profit margins.
The airline’s earnings before interest and tax (EBIT) for the quarter dipped slightly, falling 3% year-over-year to €1.65 billion, though this was marginally above market consensus. Net income was also down 6% from the prior year to €1.43 billion.
In its outlook, Ryanair has reduced its FY26 traffic target to 210 million passengers, a downgrade from the previous forecast of 215 million, citing ongoing aircraft delivery delays.
Although passenger numbers for FY25 are still expected to increase by around 8%, reaching up to 200 million, the revision has tempered broader growth expectations for the coming years.
The airline also declared a €0.223 interim dividend, set for February 2025, and reported a substantial reduction in net cash reserves, which now stand at €0.59 billion, down from €1.74 billion at the end of the previous quarter.
This decrease follows capital expenditures and a series of shareholder returns, including a completed €700 million buyback in August, with additional buyback efforts underway.
“We see longer term attractions to Ryanair's low-cost, and relatively high-margin (and so high ROCE/ ROIC) business model. We see FCF yields stepping up to >10% by FY26E as capex steps down, leaving scope for further shareholder returns,” said analysts at RBC Capital Markets in a note.