Wizz Air - Clouds gathered beneath the sky, time to calm down - Instant Earnings Comment from Concorde Ltd. [Hungary]

WIZZ AIR- Instant Earnings Comment

Recommendation:  Under revision

Target price (12M): Under revision

 Highlights: Wizz Air reported 19FQ2 results today before the bell. In a nutshell, the company posted worse-than-expected results in regards with top and bottom line as well. Despite passenger growth of 20% and significantly increasing unit revenue were experienced in 19H1, fuel price increase and disruption (e.g. cancellations) forced Wizz Air to cut FY19 profit guidance by 13% to the range of EUR 270-300mn from earlier expected EUR 310-340mn. Though, share priced plunged more than 30% from its peak of GBP38.0 within the previous months in tandem with its main rivals due to profit warning of Ryanair and Easyjet, it was unlikely the management to cut profit guidance, in our view. Revenue jumped by 21% to EUR 826mn out of which ticket revenue accounted for 64% of total. On the cost side, fuel costs skyrocketed by 53% in 19FQ2 on yearly basis, ex-fuel CASK rose 1.4% YoY to 2.25 Euro cents. Net profit of EUR 242mn for 19FQ2 was disappointing.

• Guidance: The Management has delivered many changes in the guidance for the 2019 Financial Year. However, Capacity growth was expected to be trimmed by somewhat after Wizz Air issued a disappointing Oct. traffic stat. yesterday morning. As a result of the increasing fuel costs, Fuel CASK is expected to rise by 22% YoY in FY2019 that was a meaningful upgrade from the previously estimated Fuel CASK increase of 15%. Despite higher salaries and disruptions, ex-fuel CASK remained unchanged for the financial year as mgmt. sees some room to lower unit costs in the second half of the year. More importantly, net profit guidance was cut by nearly 13% to the range of EUR 270-300mn, however we believe it was partly incorporated into the share price after rival’s profit warning.