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4 Airline Stocks in Focus after United Airlines' Comeback
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The gloomy skies finally seem to be showing hints of brightness for airline stocks as one of the largest U.S. airlines reported a rise in passenger traffic and unveiled an encouraging outlook for the second quarter.
United Continental Holding Inc.’s (UAL - Free Report) United Airlines recently announced a 1.4% increase in traffic – measured in revenue passenger miles (RPMs). The company also has issued an improved guidance for the second-quarter consolidated passenger revenue per available seat mile (PRASM: a key measure of unit revenue), which is now likely to decline in the band of 6.50% to 6.75% (the previous outlook had projected a 6.50% to 7.5% decline).
As a result, United Airlines’ stock jumped 8.84% closing at $46.16 on Jul 12. United Airlines is also expecting pre-tax margin in the range of 14% to 14.5% while fuel price (inclusive of all cash settled hedges) is projected at $1.44 per gallon (old guidance: $1.45 to $1.50). The company’s improved outlook is a result of better-than-expected international yields coupled with a surge in business travel in the final week of June. Meanwhile, United Continental recently launched United Polaris with a range of classy amenities to attract business and corporate travelers.
Change in Store for the Others?
Most of the top airline stocks have been grappling with adverse factors over the past few months as demand was hurt by the terror attacks, soft economic growth, lackluster earnings and foreign currency fluctuations. Despite the low oil prices, which have kept margins relatively higher since oil makes up a sizable chunk of operating cost for airlines, earnings have failed to impress.
However, with United Airlines reinstating hope in the space, airline stocks could be positioned for sunnier days ahead. Adding to the bullishness, summer travel this year is likely to touch an all-time high, as per the Airlines for America (“A4A”).
4 Compelling Airline Stocks
We have picked four airline stocks with a Zacks Rank #1 (Strong Buy) or 2 (Buy) coupled with some other positive factors which could be considered by investors such as a VGM Score of A or B, low PE compared to industry and good earning growth prospects.
Cathay Pacific AirwaysLimited (CPCAY - Free Report) , headquartered in Hong Kong, operates commercial airline and cargo service across a host of global destinations. The company has a Zacks Rank #1 in addition to a VGM score of B, which make it a favorable pick. Cathay Pacific’s PE stands at 5.51 compared to an industry PE of 27.40 which makes it much cheaper. The Zacks Consensus Estimate for the stock has improved by 20 cents to $1.36 over the past 60 days.
GOL Linhas Aereas Inteligentes S.A. , based in Sao Paulo, Brazil, is the largest low-cost South American airline company. GOL has a sizable chunk of market share in Latin America and is expected to gain significantly from the upcoming Olympic Games in the nation. The company sports a Zacks Rank #1. The company has been observing high volumes with its shares rallying 20.08% on Jul 12.
Air France-KLM SA (AFLYY - Free Report) is a leading global airline headquartered in Paris,. The company holds a Zacks Rank #2 and VGM Score A. It has a low PE of 3.49 while the Zacks Consensus Estimate for current year earnings is pegged at $1.87, displaying an expected earnings growth of over 100%.
ANA Holdings Inc. (ALNPY - Free Report) is a Tokyo, Japan-based airline operating internationally. The company holds a Zacks Rank #2 and a VGM Score A which makes it a good investment choice. Additionally, ANA Holdings has an attractive PE of 12.38. Earnings for the company are expected to grow over 20% this year.
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4 Airline Stocks in Focus after United Airlines' Comeback
The gloomy skies finally seem to be showing hints of brightness for airline stocks as one of the largest U.S. airlines reported a rise in passenger traffic and unveiled an encouraging outlook for the second quarter.
United Continental Holding Inc.’s (UAL - Free Report) United Airlines recently announced a 1.4% increase in traffic – measured in revenue passenger miles (RPMs). The company also has issued an improved guidance for the second-quarter consolidated passenger revenue per available seat mile (PRASM: a key measure of unit revenue), which is now likely to decline in the band of 6.50% to 6.75% (the previous outlook had projected a 6.50% to 7.5% decline).
As a result, United Airlines’ stock jumped 8.84% closing at $46.16 on Jul 12. United Airlines is also expecting pre-tax margin in the range of 14% to 14.5% while fuel price (inclusive of all cash settled hedges) is projected at $1.44 per gallon (old guidance: $1.45 to $1.50). The company’s improved outlook is a result of better-than-expected international yields coupled with a surge in business travel in the final week of June. Meanwhile, United Continental recently launched United Polaris with a range of classy amenities to attract business and corporate travelers.
Change in Store for the Others?
Most of the top airline stocks have been grappling with adverse factors over the past few months as demand was hurt by the terror attacks, soft economic growth, lackluster earnings and foreign currency fluctuations. Despite the low oil prices, which have kept margins relatively higher since oil makes up a sizable chunk of operating cost for airlines, earnings have failed to impress.
However, with United Airlines reinstating hope in the space, airline stocks could be positioned for sunnier days ahead. Adding to the bullishness, summer travel this year is likely to touch an all-time high, as per the Airlines for America (“A4A”).
4 Compelling Airline Stocks
We have picked four airline stocks with a Zacks Rank #1 (Strong Buy) or 2 (Buy) coupled with some other positive factors which could be considered by investors such as a VGM Score of A or B, low PE compared to industry and good earning growth prospects.
Cathay Pacific Airways Limited (CPCAY - Free Report) , headquartered in Hong Kong, operates commercial airline and cargo service across a host of global destinations. The company has a Zacks Rank #1 in addition to a VGM score of B, which make it a favorable pick. Cathay Pacific’s PE stands at 5.51 compared to an industry PE of 27.40 which makes it much cheaper. The Zacks Consensus Estimate for the stock has improved by 20 cents to $1.36 over the past 60 days.
GOL Linhas Aereas Inteligentes S.A. , based in Sao Paulo, Brazil, is the largest low-cost South American airline company. GOL has a sizable chunk of market share in Latin America and is expected to gain significantly from the upcoming Olympic Games in the nation. The company sports a Zacks Rank #1. The company has been observing high volumes with its shares rallying 20.08% on Jul 12.
Air France-KLM SA (AFLYY - Free Report) is a leading global airline headquartered in Paris,. The company holds a Zacks Rank #2 and VGM Score A. It has a low PE of 3.49 while the Zacks Consensus Estimate for current year earnings is pegged at $1.87, displaying an expected earnings growth of over 100%.
ANA Holdings Inc. (ALNPY - Free Report) is a Tokyo, Japan-based airline operating internationally. The company holds a Zacks Rank #2 and a VGM Score A which makes it a good investment choice. Additionally, ANA Holdings has an attractive PE of 12.38. Earnings for the company are expected to grow over 20% this year.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>