Ryanair Shareholders Rewarded With Massive Buyback Program

On Monday, European discount airline Ryanair Holdings plc (ADR) RYAAY announced that it would be using some of its excess cash to conduct an $867 million share-repurchase program.

The company's third-quarter earnings were impressive, despite some turbulence in the sector, but Ryanair Chief Financial Officer Neil Sorahan said he believes the worst of it is already over.

Strong Results

Ryanair reported that its third-quarter profit jumped from €48.9 million in 2014 to €102.7 million in 2015 and sales increased by 17 percent from October to December. Investors were impressed by the positive results, especially in the wake of the November Paris terror attacks, which significantly weighed on sales and caused fares to fall. However, Ryanair said its low costs helped compensate for losses due to the Paris attacks, and the firm was able to stay on track for the quarter.

Related Link: American Airlines Inflection Point Is On Its Way, Says Cowen Analyst Amid Upgrade

Buybacks

On February 5, Ryanair will begin its share repurchase program, which is expected to continue for nine months. This marks the firm's largest buyback program to date, but the company said that at the end of this buyback scheme, it will have returned some €4 billion to investors over the past eight years.

Strong Growth Potential

Ryanair pointed to lower fuel costs in the coming year as a way to continue reducing passenger fares. The firm said that it could save more than €430 million due to low oil prices. The company has already secured fuel prices for the majority of its projected consumption in the coming year, but price pressure from other airlines making similar hedges could create more fare competition.

Too Late To Jump In?

Ryanair is an attractive opportunity for investors looking to diversify their portfolio and include some European assets, but some say it's too late to get on board. While its true that much of Ryanair's optimism for the coming year has been priced in already, the firm's share price has fallen nearly 10 percent so far this year. Analysts are expecting to see the firm deliver EPS growth of 15 percent annually over the next two years, meaning that the window of opportunity may not be closed just yet.

Image Credit: Public Domain