EasyJet hit its best level in two years on Friday on growing optimism ahead of the first trading update from its new chief executive.
Johan Lundren, who took over from Dame Carolyn McCall as easyJet chief in December, is expected next week to report improved first-quarter revenue per seat as well as lower unit costs thanks to fuel hedging — and may refresh guidance on its Air Berlin acquisition having started flights to Berlin Tegel airport this month.
Ahead of the update, Morgan Stanley turned positive on easyJet with a £17.25 target price.
Short-haul industry consolidation and slowing growth rates at tour operators should be positive for the low-cost carriers, as should sterling strength, which will help offset the recent move higher for oil futures, said the broker.
EasyJet closed up 4.7 per cent at £15.85 in a mixed wider market where dollar earners provided the support. The FTSE 100 was 0.4 per cent higher, up 29.83 points, at 7,730.79.
Big-ticket retailers were under pressure after a profit warning from Carpetright, which slumped 39.4 per cent to 99.6p after reporting a demand downturn for its post-Christmas sale.
InterContinental Hotels took on 2.6 per cent to £49.28 after Goldman Sachs turned positive with a £56 target.
An improvement in US corporate spending and accelerated room openings globally have not yet been reflected in InterContinental’s valuation, which is at a 7 per cent discount to asset-light hotel peers, said Goldman.
“We expect a pick-up in revenue growth to drive a re-rating of the shares, while expecting the group’s longer-term strategy to remain largely unchanged.”
Aim-listed Fevertree Drinks — the subject of bid speculation among day traders following its appointment last week of Unilever’s Kevin Havelock as a non-executive director — rose a further 9.8 per cent to £23.84p.
Both Morgan Stanley and Jefferies started coverage of Fevertree with buy advice and share-price targets of £30.
Neither broker based its call on takeover hopes, though Jefferies did see the tonic-water maker as a plausible target for Coca-Cola.
Management changes at Coke mean it “could be more open to the premium mixer concept”, in spite of the company’s historical links to the temperance movement, but antitrust would be tricky given Coke’s UK bottling network licences main rival Schweppes, the broker argued.
Unilever took on 2.2 per cent to £41.08, helped by Exane BNP Paribas research highlighting that the group’s quoted Indian and Indonesian subsidiaries make up 38 per cent of its market capitalisation.
This leaves core Unilever trading at just 14.6 times 2018 earnings, a material discount to peers in spite of its relative strength in emerging markets, Exane said.