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Investing.com -- RBC Capital Markets upgraded easyJet (LON:EZJ) to “outperform” from “sector perform” and raised its price target to 650p from 570p, citing expectations of stronger-than-forecast profit growth in the 2026 fiscal year, in a note dated Tuesday.
Analysts forecast headline profit before tax of £791 million for FY26, about 3% ahead of the consensus estimate of £762 million.
RBC expects 14% PBT growth in both FY25 and FY26, though FY26 is seen benefiting more from company-led initiatives such as reduced winter losses, fleet upgrades, and expansion of the easyJet Holidays segment.
The report highlighted several drivers behind the improved forecast. Easing fuel prices are expected to reduce easyJet’s unit fuel costs by 7% in FY26.
The airline has hedged 44% of its fuel needs at prices more than 10% lower year-over-year. Fuel accounts for more than 25% of the airline’s cost base, and lower spot prices further support the outlook.
The fleet transition to lower-cost aircraft is also a key element. easyJet is scheduled to receive 17 A320neo and A321neo aircraft in FY26, compared with nine deliveries in FY25.
These will replace older A319 models and are expected to cut unit costs. The airline plans 30 new aircraft deliveries in FY27.
Capacity growth in the first half of the current year reached 12%, helping reduce unit costs, though requiring some fare stimulation.
RBC noted that as this growth matures, it should support further cost efficiency, particularly in winter, when losses have historically widened.
Revenue from Holidays is also expected to grow. RBC said easyJet’s package travel business has room to increase cross-sell rates from the current 6% attachment rate. This is expected to contribute to profitability over the medium term.
Demand indicators remain strong. RBC cited data from its Elements website and Barclaycard showing increased activity on airline websites, including easyJet, British Airways and Jet2, in March and April.
Travel-related spending was up 6% year-over-year in April, supporting forecasts for growth in fares and unit revenues.
This trend continued despite weaker consumer sentiment in April, which improved in May.
For the current fiscal year, RBC said easyJet is 80% sold for the third quarter, up 0.5 percentage points from a year earlier, and 42% sold for the fourth quarter, up 2.2 percentage points. That performance suggests the airline is on track to meet FY25 expectations.
Despite a £1 billion PBT target, RBC said neither its forecast nor consensus reflects full delivery of that goal, meaning any upside surprise in FY26 could prompt further upgrades.
At its current valuation, easyJet trades at around 7.4 times FY26 estimated earnings. RBC’s revised 650p price target implies a valuation of approximately 8.3 times earnings.
The analysts said greater confidence in the company’s path to its medium-term profit targets could support further multiple expansion.