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EasyJet (EZJ) 371.25p

The low-cost airline issued a profit warning after admitting that sky-high oil prices may severely eat into earnings. (Read the full story: www.sharesmagazine.com/node/3725)

Shares says: EasyJet is facing an extra £45 million for fuel. It said this would reduce full-year profit despite a rise in passengers. It has so far sold 27% of its summer seats, slightly ahead of the same time last year, and predicted H1 results would meet expectations outlined last month. Rising fuel costs are due, given record oil prices, but investors were spooked when the airline went public on its concerns. When cost pressures far outweigh benefits of rising passenger numbers investors should seek value elsewhere. SELL

The City - Collins Stewart says: EasyJet has 20% of H2 fuel hedged; we understand this rolls off to around 10% of (full year) 2009. Management highlighted that at current oil prices, an additional £45 million of cost would be incurred this year, implying a consensus earnings downgrade for the current year from 41p to 30p-35p. [Note: the company’s broker has cut to 30p]. We see similar risk to (full year) 2009, where consensus 49p of earnings looks at risk and we’d expect a cut to around 35p-37p. SHORTING OPPORTUNITY

Telegraph says: The share price chart shows the market has bet on a profits warning for months. Chief executive Andy Harrison has been flying against the headwinds with his mantra that the low-fare carrier could deliver a 20% rise in profits to around £230 million pre-tax this year. After accounting for the rocketing fuel price, profits estimates have dived, with UBS cutting from £243 million to £195 million this year and from £306 million to £217 million in 2009. More worrying short term is how little scope EasyJet has to make up the profits shortfall by raising fares or cutting costs. Then there’s a possible consumer downturn. SELL