Wizz Air share price: what to expect from annual results

When is Wizz Air’s earnings date?

Wizz Air reports full-year (FY) earnings on 31 May, covering its financial year.

Wizz Air full-year earnings – what does the City expect?

Wizz Air is expected to report pre-tax profit of €293 million, up from €286 million a year earlier, while revenue is forecast to rise 20% to €2.3 billion, and headline earnings per share (EPS) to rise 4% to 2.27 cents.

Full-year guidance for the firm at its third-quarter (Q3) results pointed to profits of €270 million–300 million, so the current forecast is within the expected range. However, the firm’s Q3 numbers did not provide much room for optimism.

In Q3, revenue rose 21.2% to €512.7 million, as a result of a 14.9% rise in passenger numbers to 8.1 million. Ancillary revenue rose 22.3% to €221.5 million, and the load factor (the measure of how fully loaded a plane is) rose to 91%, up two percentage points.

But this good news was almost entirely outweighed by increasing operating costs, up by just over a quarter for the period. In fact, costs exactly equalled revenue for the period, a notable event that most companies would prefer to avoid. Total unit costs rose 9.3% to 3.53 cents per available seat kilometre, with most of this rise driven by increasing fuel costs.

Budget airlines face major challenges, as recent updates from easyJet and Ryanair have demonstrated. For UK airlines, and indeed all those servicing UK airports, Brexit hangs over them like the ghost at the feast. The clock is ticking down to the UK’s next official exit date, and so far there seems little sign of any withdrawal agreement being passed. Indeed, the latest attempt by Prime Minister Theresa May to get her Withdrawal Agreement through Parliament seems doomed, and with it her premiership. A no-deal exit has been ruled out by the UK Parliament, but unless the EU grants an extension then the UK will have to leave without a deal, regardless of the wish of Parliament.

Then there is the problem of rising fuel costs. Budget airlines are very sensitive to these costs, given that they have less room to increase prices in response to any rise in oil prices. Higher fuel costs reduce profit margins, and hit performance, and it was this that hurt Wizz Air in Q3. Given that the oil price has continued to rise since January, another warning on this point may be necessary at its FY results.

Finally, budget airlines must face the prospect of air traffic control strikes and other delays across Europe this summer. This has already hurt performance in recent years, and will be yet another headache for the embattled sector.

The shares trade at around 15.9 times forward earnings, a relatively high number for a company facing many headwinds. As a result, any failure to meet or beat expectations in its FY results could provoke some significant downside volatility.

How to trade Wizz Air’s full-year results

The current 14-day average true range, a measure of volatility for a market’s price, is currently 95p for Wizz Air. Volatility has declined significantly since November and December, when the 14-day average true range (ATR) hit a peak of 145p, around 4.7% of the then share price around £30.68. The average move on results day, according to Bloomberg data, is 4.4%.

Of 20 analyst recommendations on the stock, twelve are ‘buys’ and eight are ‘holds’, with no sell recommendations. The current median share price target is £34.68.

Wizz Air share price – technical analysis

Wizz Air’s share price fell sharply during the last few months of 2018, as the broader market environment saw heavy losses for equity indices. From the July peak to the October low, almost 40% was wiped off the shares. However, the price found a low at £23.00, and then began a steady rally that actually preceded the recovery on the main market indices. Since that October low, a series of higher lows and higher highs has been seen, with support found at £26.76 and then £27.91. The current pullback may well find support at the post-October rising trendline, suggesting that support enters the frame around £30.00.

If a higher low is created and the shares begin to rebound, then the May high at £35.53 is the first upside target to watch for, followed on by the summer 2018 high at £38.16. Renewed declines below trendline support bring £27.94 and £26.76 into play as possible support one more.

Troubled outlook for Wizz Air

The outlook seems tough for Wizz Air. Higher fuel prices and disruption across Europe, plus Brexit, threatens to hit earnings hard. The shares have recovered well from the 2018 low, and may well create a higher low and an opportunity to join a rising trend. A failure to meet guidance however may cost the shares dear.