For Immediate Release
Chicago, IL – August 23, 2017 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog includeSkyWest Inc. (NASDAQ:SKYW – Free Report), Deutsche Lufthansa Aktiengesellschaft (OTCMKTS:DLAKY – Free Report), Ryanair Holdings plc (NASDAQ:RYAAY – Free Report) and Gol Linhas Aereas Inteligentes SA (NYSE:GOL – Free Report).
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
Here are highlights from Tuesday’s Analyst Blog:
4 Airline Stocks to Buy Amid Ongoing Turbulence
The twin attacks of terror in Spain late last week hit airline stocks hard. Though the European airline stocks bore the brunt, their U.S. counterparts too felt the pinch.
In fact, heavyweights like American Airlines and Delta Air Lines fell sharply on Aug 17, following the Barcelona attacks. Both stocks currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Twin Attacks
On Aug 17, a van went through a crowd of tourists in Barcelona, killing at least 13 and injuring many. Such an inhuman act was followed by a second attack in the coastal town of Cambrils, located approximately 120 kilometers south of Barcelona.
Reportedly the five terrorists involved in the Cambrils attacks were shot dead by the police. Both the incidents have claimed the lives of at least 14 along with 130 others severely injured. Such acts of terrorism affected airline stocks as there is a possibility of waning travel demand due to security fears.
In fact, the timing of the attacks could not have been worse as the three-month period between June and August has been predicted to be the busiest one for U.S. carriers in terms of air travel.
According to the forecast by the Airlines for America (A4A) in May 2017, approximately 234.1 million passengers will be transported worldwide by U.S. airlines in the above-mentioned period, up 4% from the 2016 levels. Notably, air travel projection for summer is of 2.54 million fliers per day during the said period.
Given this backdrop, it is of little wonder that airline stocks shed value on the news of the attacks.
Buffett’s Airline Exposure Trimmed
According to the 13-F filing by Warren Buffett’s Berkshire Hathaway in the second quarter, the company reduced its stakes in three major U.S. carriers.
Reportedly, the Omaha, NE-based company reduced its stakes in Delta, American and United Continental by 4.6%, 3.5% and 2.6%, respectively, on a sequential basis.
Moreover, the Oracle of Omaha’s investment in low-cost carrier Southwest Airlines Co. reportedly remained unchanged.
In fact, Buffett is one of the most revered investors of all times and his decision to trim investments in three airline heavyweights also points at the fact that all is not well with this key sector.
High Labor Costs: Major Headwind
With airline companies constantly inking deals with various labor groups, it is of little surprise that costs on this front are increasing, which is limiting bottom-line growth.
At American Airlines, total operating expenses increased 11.1% year over year in the second quarter to $9.6 billion. Expenses pertaining to salaries and benefits were up 12.5%. Consolidated operating costs per available seat miles (CASM), excluding special items. also rose 6.8%.
The scenario is expected to be similar in the third quarter as well. Delta expects non-fuel unit cost (including profit sharing) to increase approximately 4%. Additionally, consolidated cost per available seat miles (excluding special items and fuel) is anticipated to increase 5% at American Airlines.
Capacity Overexpansion: Major Challenge
Capacity-related woes had been plaguing stocks in the airline space for quite some time. In fact, the July traffic reports of most carriers have highlighted that such issues might resurface. Major carriers like American Airlines, United Continental and JetBlue Airways Corp. have posted declines in their respective load factors (percentage of seats filled by passengers) for the same month. The downturn was due to capacity expansion outweighing traffic growth.
Generally, carriers are forced to reduce fares as unit revenues decline in the face of capacity outpacing demand growth. While low air fares are favorable for fliers, it is a drag on the top lines of carriers with their profits being hurt.
Other Headwinds
Carriers like United Continental, American Airlines and Spirit Airlines have been laid low by passenger-related issues this year.
In fact, Spirit Airlines has issued a lackluster guidance with respect to total revenue per available seat miles (TRASM: a key measure of unit revenue) for the third quarter. This was mainly due to the dispute with its pilots in May leading to multiple flights cancellations, thereby causing passenger harassment. The metric is expected to decline in the band of 2%-4% on a year-over-year basis, as well.
Moreover, technical glitches have been a great nuisance for carriers. Evidently, the likes of Delta and Southwest Airlines have seen their operations being affected by technological problems this year. Given that technological infrastructure is a key expense for airlines, the profitability of carriers might be affected in the event of such malfunctions, going forward.
Price Performance
In view of the above headwinds, it is of little wonder that the Zacks Airline industry underperformed the broader market in the last three months. The S&P 500 Index gained 1.7%, as against the industry’s decline of 0.6%.
Some Positives Remain
According to many market watchers, the impact of the terror attacks in Spain is likely to be short-term in nature. This is in keeping with the trend that market weakness resulting from such anti-social incidents is usually short lived, especially when the frequency of occurrence is rapid as has been the case of late.
Notably, the recent forecast by A4A on the upcoming Labor Day travel period (Aug 30-Sep 5) has highlighted the fact that U.S. carriers will make hay during the period with approximately 16.1 million passengers expected to avail services of the U.S. airlines. Travel demand is projected to increase 5% on the back of low air fares and improving disposable income. The improving unit revenue scenario is another positive for airlines.
Furthermore, the bullish Zacks Industry Rank of 50 (out of 265 groups) carried by the 22-member Airline industry highlights the fact that there are still reasons to be positive on the sector despite some hiccups. In fact, the airline industry falls under the broader Transportation sector (one of 16 Zacks Sectors). The favorable rank places the companies in the top 20% of the Zacks industries.
We put our X industries (all 265 of them) into two groups: the top half (i.e., industries with the best average Zacks Rank) and the bottom half (the industries with the worst average Zacks Rank).
Over the last 10 years, using a one-week rebalance, the top half beat the bottom half by a factor of more than 2 to 1.
Click here to know more: About Zacks Industry Rank
How to Pick Winners?
The above commentary clearly reflects that despite headwinds all is not lost for airline stocks and there exists few hidden gems in the space which investors can unearth. In fact, the stocks have the potential to generate handsome returns.
However, given the vastness of the airline space, it is by no means an easy task to identify the few bright spots. We have utilized our Zacks Stock Screener to pinpoint such stocks. The Zacks Rank, which justifies a company’s strong fundamentals, can come in really handy.
Our Choices
SkyWest Inc. (NASDAQ:SKYW – Free Report) operates as a regional airline in the United States through its subsidiaries. The company currently sports a Zacks Rank #1 and a Value Score of A. The Zacks Consensus Estimate for its current-year earnings moved up 1.9% over the last 60 days to $3.24.
Deutsche Lufthansa Aktiengesellschaft (OTCMKTS:DLAKY – Free Report) functions as an aviation company in Germany as well as internationally. The company sports a Zacks Rank #1 and has a Value Score of A. The Zacks Consensus Estimate for its current-year earnings climbed 30% over the last 60 days to $3.73.
Ryanair Holdings plc (NASDAQ:RYAAY – Free Report) is an Irish low-fare airliner that primarily operates from Europe. The carrier sports a Zacks Rank #1 and has a Growth Score of A. The Zacks Consensus Estimate for its current-year earnings moved up 5.6% over the last 60 days to $7.75.
Gol Linhas Aereas Inteligentes SA (NYSE:GOL – Free Report) is engaged in providing mobile geolocation services to its passengers and designing a Website featuring accessibility resources to assist people with visual and motor impairments. The company carries a Zacks Rank #2 (Buy) and has a Growth Score of B.
Zacks' 10-Minute Stock-Picking Secret
Since 1988, the Zacks system has more than doubled the S&P 500 with an average gain of +25% per year. With compounding, rebalancing, and exclusive of fees, it can turn thousands into millions of dollars.
But here's something even more remarkable: You can master this proven system without going to a single class or seminar. And then you can apply it to your portfolio in as little as 10 minutes a month.
Learn the secret >>
About Zacks Equity Research
Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.
Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.
Strong Stocks that Should Be in the News
Many are little publicized and fly under the Wall Street radar. They're virtually unknown to the general public. Yet today's 220 Zacks Rank #1 "Strong Buys" were generated by the stock-picking system that has nearly tripled the market from 1988 through 2015. Its average gain has been a stellar +26% per year.See these high-potential stocks free >>.
Get the full Report on SKYW - FREE
Get the full Report on DLAKY - FREE
Get the full Report on RYAAY - FREE
Get the full Report on GOL - FREE
Follow us on Twitter: https://twitter.com/zacksresearch
Join us on Facebook: https://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Media Contact
Zacks Investment Research
800-767-3771 ext. 9339
support@zacks.com
https://www.zacks.com/
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.
Image: Bigstock
The Zacks Analyst Blog Highlights: SkyWest, Deutsche Lufthansa Aktiengesellschaft, Ryanair Holdings and Gol Linhas Aereas Inteligentes
For Immediate Release
Chicago, IL – August 23, 2017 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog includeSkyWest Inc. (NASDAQ:SKYW – Free Report), Deutsche Lufthansa Aktiengesellschaft (OTCMKTS:DLAKY – Free Report), Ryanair Holdings plc (NASDAQ:RYAAY – Free Report) and Gol Linhas Aereas Inteligentes SA (NYSE:GOL – Free Report).
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
Here are highlights from Tuesday’s Analyst Blog:
4 Airline Stocks to Buy Amid Ongoing Turbulence
The twin attacks of terror in Spain late last week hit airline stocks hard. Though the European airline stocks bore the brunt, their U.S. counterparts too felt the pinch.
In fact, heavyweights like American Airlines and Delta Air Lines fell sharply on Aug 17, following the Barcelona attacks. Both stocks currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Twin Attacks
On Aug 17, a van went through a crowd of tourists in Barcelona, killing at least 13 and injuring many. Such an inhuman act was followed by a second attack in the coastal town of Cambrils, located approximately 120 kilometers south of Barcelona.
Reportedly the five terrorists involved in the Cambrils attacks were shot dead by the police. Both the incidents have claimed the lives of at least 14 along with 130 others severely injured. Such acts of terrorism affected airline stocks as there is a possibility of waning travel demand due to security fears.
In fact, the timing of the attacks could not have been worse as the three-month period between June and August has been predicted to be the busiest one for U.S. carriers in terms of air travel.
According to the forecast by the Airlines for America (A4A) in May 2017, approximately 234.1 million passengers will be transported worldwide by U.S. airlines in the above-mentioned period, up 4% from the 2016 levels. Notably, air travel projection for summer is of 2.54 million fliers per day during the said period.
Given this backdrop, it is of little wonder that airline stocks shed value on the news of the attacks.
Buffett’s Airline Exposure Trimmed
According to the 13-F filing by Warren Buffett’s Berkshire Hathaway in the second quarter, the company reduced its stakes in three major U.S. carriers.
Reportedly, the Omaha, NE-based company reduced its stakes in Delta, American and United Continental by 4.6%, 3.5% and 2.6%, respectively, on a sequential basis.
Moreover, the Oracle of Omaha’s investment in low-cost carrier Southwest Airlines Co. reportedly remained unchanged.
In fact, Buffett is one of the most revered investors of all times and his decision to trim investments in three airline heavyweights also points at the fact that all is not well with this key sector.
High Labor Costs: Major Headwind
With airline companies constantly inking deals with various labor groups, it is of little surprise that costs on this front are increasing, which is limiting bottom-line growth.
At American Airlines, total operating expenses increased 11.1% year over year in the second quarter to $9.6 billion. Expenses pertaining to salaries and benefits were up 12.5%. Consolidated operating costs per available seat miles (CASM), excluding special items. also rose 6.8%.
The scenario is expected to be similar in the third quarter as well. Delta expects non-fuel unit cost (including profit sharing) to increase approximately 4%. Additionally, consolidated cost per available seat miles (excluding special items and fuel) is anticipated to increase 5% at American Airlines.
Capacity Overexpansion: Major Challenge
Capacity-related woes had been plaguing stocks in the airline space for quite some time. In fact, the July traffic reports of most carriers have highlighted that such issues might resurface. Major carriers like American Airlines, United Continental and JetBlue Airways Corp. have posted declines in their respective load factors (percentage of seats filled by passengers) for the same month. The downturn was due to capacity expansion outweighing traffic growth.
Generally, carriers are forced to reduce fares as unit revenues decline in the face of capacity outpacing demand growth. While low air fares are favorable for fliers, it is a drag on the top lines of carriers with their profits being hurt.
Other Headwinds
Carriers like United Continental, American Airlines and Spirit Airlines have been laid low by passenger-related issues this year.
In fact, Spirit Airlines has issued a lackluster guidance with respect to total revenue per available seat miles (TRASM: a key measure of unit revenue) for the third quarter. This was mainly due to the dispute with its pilots in May leading to multiple flights cancellations, thereby causing passenger harassment. The metric is expected to decline in the band of 2%-4% on a year-over-year basis, as well.
Moreover, technical glitches have been a great nuisance for carriers. Evidently, the likes of Delta and Southwest Airlines have seen their operations being affected by technological problems this year. Given that technological infrastructure is a key expense for airlines, the profitability of carriers might be affected in the event of such malfunctions, going forward.
Price Performance
In view of the above headwinds, it is of little wonder that the Zacks Airline industry underperformed the broader market in the last three months. The S&P 500 Index gained 1.7%, as against the industry’s decline of 0.6%.
Some Positives Remain
According to many market watchers, the impact of the terror attacks in Spain is likely to be short-term in nature. This is in keeping with the trend that market weakness resulting from such anti-social incidents is usually short lived, especially when the frequency of occurrence is rapid as has been the case of late.
Notably, the recent forecast by A4A on the upcoming Labor Day travel period (Aug 30-Sep 5) has highlighted the fact that U.S. carriers will make hay during the period with approximately 16.1 million passengers expected to avail services of the U.S. airlines. Travel demand is projected to increase 5% on the back of low air fares and improving disposable income. The improving unit revenue scenario is another positive for airlines.
Furthermore, the bullish Zacks Industry Rank of 50 (out of 265 groups) carried by the 22-member Airline industry highlights the fact that there are still reasons to be positive on the sector despite some hiccups. In fact, the airline industry falls under the broader Transportation sector (one of 16 Zacks Sectors). The favorable rank places the companies in the top 20% of the Zacks industries.
We put our X industries (all 265 of them) into two groups: the top half (i.e., industries with the best average Zacks Rank) and the bottom half (the industries with the worst average Zacks Rank).
Over the last 10 years, using a one-week rebalance, the top half beat the bottom half by a factor of more than 2 to 1.
Click here to know more: About Zacks Industry Rank
How to Pick Winners?
The above commentary clearly reflects that despite headwinds all is not lost for airline stocks and there exists few hidden gems in the space which investors can unearth. In fact, the stocks have the potential to generate handsome returns.
However, given the vastness of the airline space, it is by no means an easy task to identify the few bright spots. We have utilized our Zacks Stock Screener to pinpoint such stocks. The Zacks Rank, which justifies a company’s strong fundamentals, can come in really handy.
Our Choices
SkyWest Inc. (NASDAQ:SKYW – Free Report) operates as a regional airline in the United States through its subsidiaries. The company currently sports a Zacks Rank #1 and a Value Score of A. The Zacks Consensus Estimate for its current-year earnings moved up 1.9% over the last 60 days to $3.24.
Deutsche Lufthansa Aktiengesellschaft (OTCMKTS:DLAKY – Free Report) functions as an aviation company in Germany as well as internationally. The company sports a Zacks Rank #1 and has a Value Score of A. The Zacks Consensus Estimate for its current-year earnings climbed 30% over the last 60 days to $3.73.
Ryanair Holdings plc (NASDAQ:RYAAY – Free Report) is an Irish low-fare airliner that primarily operates from Europe. The carrier sports a Zacks Rank #1 and has a Growth Score of A. The Zacks Consensus Estimate for its current-year earnings moved up 5.6% over the last 60 days to $7.75.
Gol Linhas Aereas Inteligentes SA (NYSE:GOL – Free Report) is engaged in providing mobile geolocation services to its passengers and designing a Website featuring accessibility resources to assist people with visual and motor impairments. The company carries a Zacks Rank #2 (Buy) and has a Growth Score of B.
Zacks' 10-Minute Stock-Picking Secret
Since 1988, the Zacks system has more than doubled the S&P 500 with an average gain of +25% per year. With compounding, rebalancing, and exclusive of fees, it can turn thousands into millions of dollars.
But here's something even more remarkable: You can master this proven system without going to a single class or seminar. And then you can apply it to your portfolio in as little as 10 minutes a month.
Learn the secret >>
About Zacks Equity Research
Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.
Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.
Strong Stocks that Should Be in the News
Many are little publicized and fly under the Wall Street radar. They're virtually unknown to the general public. Yet today's 220 Zacks Rank #1 "Strong Buys" were generated by the stock-picking system that has nearly tripled the market from 1988 through 2015. Its average gain has been a stellar +26% per year.See these high-potential stocks free >>.
Get the full Report on SKYW - FREE
Get the full Report on DLAKY - FREE
Get the full Report on RYAAY - FREE
Get the full Report on GOL - FREE
Follow us on Twitter: https://twitter.com/zacksresearch
Join us on Facebook: https://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Media Contact
Zacks Investment Research
800-767-3771 ext. 9339
support@zacks.com
https://www.zacks.com/
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.