Westjet badly miisses analyst targets


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Dagger:

I didn't listen to the conference call - just watched the ROB TV interview. I thought maybe he had changed.

Any comments on how successful the fuel hedge was for them? Somewhere yesterday I saw a claim that the huricane season cost Westjet 10 cents per share. I assume thats including fuel cost (the more signifcant) and flight delays and cancellations (which I expect would be rather insignificant).

Also, what's your call on ACE?

Thanks

seeker

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Seeker,

In the coferance call Sandy mentioned the fuel hedge only amounted to 200,000 in savings for us over the quarter.

Dagger,

I'd hardly say it was a diatribe against AC. He pionted out some facts (and yes there was a hint of disdain in his voice over YXX) but I think his tone was very measured.

Cheers

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Nesbitt Burns Report:

WESTJET AIRLINES (WJA-TSX) Claude Proulx, CFA

Rating: Underperform

Price: $12.81

Target: $10.00

2005A EPS: $0.19

2006E EPS: $0.50 â

2007E EPS: $0.60 â

Title: Disappointing Fourth Quarter 2005 Results

Event: WestJet reported Q4/05 results below our expectations.

Impact: Negative. WestJet reported Q4 EPS of $0.01 versus a loss of $0.12 last year, below our estimate of $0.06 and consensus of $0.08. Revenues were $366 million versus $273 million in Q4/04, $4 million higher than expected. EBITDAR was $66 million versus $28 million last year, $5 million less than our estimate.

Forecasts: In light of the weaker than expected results, we are decreasing our 2006 forecast to $0.50 from $0.55 and to $0.60 from $0.65 for 2007.

Valuation: Based on our forecast, WJA shares currently trade at a 3% discount to Southwest’s 2006E EV/EBITDAR and at a 5% premium to its 2006E P/E multiple. However, we believe Southwest’s track record and likely better growth prospects justify Southwest’s premium.

Recommendation: We remain concerned with WestJet’s steep valuation in light of a deteriorating growth outlook. Our target price assumes that WestJet shares will trade at roughly 17x our revised 2007 EPS estimate, 12 months from now, which we believe to be generous considering that WestJet is a slowing growth story in a deeply cyclical industry. Previously we had been valuing WestJet at 18x our 2006 EPS estimate. Our target price is unchanged at $10 and the stock remains rated Underperform.

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Down another 7%, or $0.85 this morning. Ouch. ACE up 2.3% or $0.81 . I wonder what the street knows that we don't yet about ACE's earnings announcement tomorrow?

That's the beauty of the street, they really know squat, WJ had a minor runup on Monday and Tuesday. If ACE meets the street then all will be well if not (see above)

Doesn't markedly change anything except my mood. biggrin.gif

Anyone know the consensus EPS estimate for ACE?

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Fido - 2007!?

Yup. Read it and weep.

These are the problems of being 'launch customer' for anything and particularly for a sophisticated software package. WestJet has bought themselves a BIG can of worms with this one and should be looking for a way out very quickly.

Clive said that WS has 'spent between 16 and 20 million dollars on the project already' and they can't get the thing to work. There are 32 interfaces to be built to other systems and they are 'very complicated'. Another bon mot from Clive 'If it does come on line in early 2007 the beneficial results will not be apparent until late 2007'.

Mind you Air Canada is going down the same path with their Athena project.

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..... .It's like his handlers promised him an Ovaltine if he would just be nice the whole time, but he couldn't resist the temptation to run his mouth. biggrin.gif

This is exactly what you hear from insiders. They have many sleepless nights before one of these conference calls, wondering just what might cause the explosion.

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Guest rattler

tid bit from todays YYZnews

a)...the WestJet 737s chartered by Transat Vacations to fly passengers from Brandon MB to Cancun Mexico will be cancelled five weeks ahead of previous plans due to low demand. The flights will terminate on February 15th for the last southbound and the last return flight will be on February 22nd. They were originally planned to go through to March 22/29 respectively.

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