EasyJet (LON:EZJ): A Rising Earnings Story Amid Industry Recovery

Investors seeking companies with clear earnings growth trajectories may find easyJet (LON:EZJ) an intriguing opportunity. While the airline’s five-year earnings per share (EPS) growth rate remains negative due to pandemic-era losses, its recent financial turnaround and strong recovery signals suggest a compelling rebound story. Supported by cost discipline, expanding holiday divisions, and pent-up travel demand, easyJet is positioning itself for sustained EPS growth as the industry normalizes.

The Case for EPS Growth in easyJet

EPS growth is a critical metric for investors evaluating a company’s profitability and future valuation. For easyJet, the path to recovery has been marked by volatility, but recent trends highlight a promising trajectory.

1. Navigating the Pandemic’s Aftermath

The airline’s five-year diluted EPS CAGR stands at -8.21% (as of May 2025), reflecting deep losses in 2020–2022. For example, its TTM EPS dropped to -£2.11 in September 2021 and -£0.29 in September 2022. However, the past two years have seen a sharp rebound. By September 2024, the TTM EPS rose to £0.77, a 363% increase from the prior year, driven by demand recovery and cost controls.

2. Strong Short-Term Growth Momentum

While the long-term CAGR remains negative, the three-year diluted EPS CAGR has surged to 33.19%, underscoring rapid recovery. For the fiscal year ending 2025, analysts project a 16.42% EPS growth, with the TTM EPS expected to reach £0.82—a 6.8% increase from 2024’s £0.77.

The first quarter of 2025 (Q1 2025) provided further evidence of improvement. easyJet narrowed its pre-tax loss to £61 million from £126 million a year earlier—a 52% reduction—while passenger numbers grew 7% YoY to 21.2 million. Its holiday division, EasyJet Holidays, reported a £43 million profit, up £12 million from 2024, with plans to expand customer numbers by 25% in 2025.

3. Key Drivers of Growth

• Cost Efficiency: Fuel costs fell 3% YoY in Q1 2025, aided by a 13% drop in fuel CASK (cost per available seat kilometer). Total CASK declined 4%, while revenue per seat (RASK) remained stable.
• Holiday Division: EasyJet Holidays now contributes significantly to profitability, with revenue surging 36% YoY in Q1 2025. This segment’s scalability reduces reliance on volatile flight demand.
• Capacity Expansion: Six new A320neo aircraft were added in Q1, with two more planned for summer 2025. This boosts capacity by 8% for FY2025, targeting popular leisure routes like Palma and Faro.
• Demand Resilience: 57% of Q2 seats and 26% of Q3 seats were sold by January 2025, ahead of prior-year levels. Easter and summer bookings suggest sustained demand.

Risks to Consider

• Fuel Prices: While hedged at £807/MT for 82% of H1 2025 fuel needs, rising oil costs could pressure margins.
• Economic Downturn: A slowdown in consumer spending could reduce discretionary travel.
• Regulatory and Operational Challenges: Heathrow capacity constraints and labor disputes could disrupt operations.

Conclusion: A Calculated Opportunity

easyJet’s negative five-year EPS CAGR masks a compelling growth story in the post-pandemic era. With a 16.42% projected EPS growth for 2025 and a 33.19% three-year CAGR, the company is on track to exceed its medium-term target of £1 billion in pre-tax profit. Strategic investments in cost efficiency, holiday divisions, and fleet expansion are key to sustaining this momentum.

Investors focused on EPS growth should note that easyJet’s Q1 2025 results—including a 52% reduction in losses and 7% passenger growth—are strong indicators of its ability to capitalize on recovery. While risks like fuel volatility persist, the airline’s diversified revenue streams and operational improvements make it a high-potential pick for those willing to overlook its long-term EPS drag. For the right investor, easyJet could be a rewarding play on the travel sector’s rebound.