EasyJet and Rolls-Royce shares gain altitude as post-pandemic recoveries take flight

By Jamie Chisholm

Shares of low-cost airline EasyJet and engine-maker Rolls-Royce were gaining altitude on Tuesday as the London-listed groups delivered updates confirming their continued emergence from pandemic-induced difficulties.

EasyJet's stock (UK:EZJ) gained more than 3% after the Europe-focused transporter said strong demand for flights delivered a move into profit and it would reinstate its dividend.

Revenue rose 42% to GBP8 billion in the 12 months to September, producing profit before tax of GBP455 million, compared to a loss of GBP178 million last year. The dividend of 4.5p per shares would deliver a payout of GBP34 million.

"EasyJet has finally put the ravages wrought by the pandemic to bed, with the tailwinds of consumers returning to travel and the group's own aggressive measures providing a twin boost," said Richard Hunter, head of markets at Interactive Investor.

EasyJet shares have risen 29% so far this year as investors priced in a recovery for the travel sector. But that's a meager return compared with the company that provides many of the engines for such airlines.

Rolls-Royce stock (UK:RR) was up another 6% on Tuesday, taking their advance in 2023 to 178% as the market continued to warm to new Chief Executive Tufan Erginbilgic and his plans for a turnaround.

In a statement on Tuesday, Rolls-Royce said it would sell its electric aircraft division looking to increase operating margins at its core civil aerospace business from 2.5% in 2022 to 15-17% by 2027.

After last month announcing plans to shed 2,500 jobs, Rolls-Royce said it was looking to make annual savings of up to GBP500 million and targeting GBP3.1 billion in free cash flow within about three years.

The strategic review comes after Rolls-Royce faced sharply declining revenues during the pandemic as cancelled flights reduced the need for its engine servicing operations.

"For all its problems, Rolls-Royce is a business with some inherent strengths -- most notably an installed base of engines on global aircraft on which it enjoys lucrative spares and repairs contracts," said Russ Mould, investment director at AJ Bell.

"For 'Turbo Tufan' it is all about backing up his words with action and he has set himself some clear parameters on which his tenure of the company can be judged," Mould added.

Ubisoft shares (FR:UBI) lost more than 8% after the French video game producer said it had raised EUR494.5 million ($541.7 million) via bonds that were convertible or exchangeable into shares. The proceeds will be used for general corporate purposes, and up to EUR250 million for the repurchase of outstanding bonds, Ubisoft said.

Infineon Technologies (XE:IFX) saw its shares nudge up 1% after Jefferies upgraded the Germany-based chipmaker from hold to buy and raised its price target from EUR40 to EUR46.

Shares in Belgian pharmaceutical firm Argenx (BE:ARGX) slumped 11% after an advance study of its treatment for bleeding disorder failed to meet targets.

German 10-year bund yields BX:TMBMKDE-10Y initially rose a few basis points before trading barely changed around 2.545% after Bundesbank chief Joachim Nagel said on Tuesday the European Central should not rush to ease policy too quickly and may raise interest rates further if the outlook for inflation worsened.

His comments came a day after ECB President Christine Lagarde said the fight to contain price growth was not over.

"Speeches from central bank policymakers this week are aimed at curbing enthusiasm that rate cuts could come sooner rather than later," said Susannah Streeter, head of money and markets at Hargreaves Lansdown.

The euro (EURUSD) was little moved, however, trading only a few pips higher at $1.0964. The pound (GBPUSD) was also little changed around $1.2630, but 10-year gilt yields BX:TMBMKGB-10Y rose 1 basis point to 4.215%, despite the British Retail Consortium saying that annual shop price inflation slowed to 4.3% from 5.2% in October, the sixth consecutive monthly decline and the lowest rate since June last year.

-Jamie Chisholm

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

11-28-23 0802ET

Copyright (c) 2023 Dow Jones & Company, Inc.