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Airline Stock Roundup: Carriers Gain on Buffett Commentary, CPA in Focus
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It was a week where billionaire investor, Warren Buffett, continued to show his affinity for airline stocks. In an interview to CNBC, the "Oracle of Omaha" did not reject the possibility of eventually owning an airline company, thereby displaying his recent interest in the space once again.
Warren Buffett, the world’s third richest man, has stakes in airline heavyweights — Delta Air Lines, Inc. (DAL - Free Report) , American Airlines Group Inc. (AAL - Free Report) , United Continental Holdings, Inc. (UAL - Free Report) and Southwest Airlines Co. (LUV - Free Report) — since 2016, after having shunned the sector for years.
On the earnings front, Copa Holdings, S.A. (CPA - Free Report) performed well in the fourth quarter outperforming revenues and earnings estimates. Moreover, Southwest Airlines featured in the news when a dog reportedly bit a child on one of its flights. In fact, the incident gained prominence as many airlines are considering changes in their respective policies pertaining to carrying animals on flights.
1. Copa Holdings’ earnings per share (excluding 2 cents from non-recurring items) of $2.36 surpassed the Zacks Consensus Estimate of $2.33. Moreover, the bottom line surged 66.2% year over year. Quarterly revenues also improved 12.4% on a year-over-year basis to $675.6 million and topped the consensus mark of $663.4 million.
The year-over-year improvement in the top line was primarily owing to 12.6% growth in passenger revenues. While passenger unit revenue per available seat mile (PRASM) climbed 3.2%, yield per passenger mile inched up 1.2%. Additionally, unit revenue per available seat mile (RASM) improved 2.9%. This apart, operating cost per available seat mile (CASM), excluding fuel, declined 6.7% in the reported quarter.
Passenger traffic (on a consolidated basis) rose 11.3% and capacity was up 9.2% in the quarter under review. Load factor expanded 160 basis points to 83.2% as traffic growth outweighed capacity increase.
2. Warren Buffett’s cash-rich Berkshire Hathaway is apparently eager to make "one or more huge acquisitions." However, the company has not yet found a suitable company to buy mainly due to valuation concerns. An airline company could foot the bill (airline stocks are inexpensive) and might be acquired by the iconic investor. This commentary of one of the most revered investors of all times positively impacted airline stocks.
3. According to data released by the International Air Transport Association (IATA), airlines fared better in 2017, as far as safety related performance was concerned, compared with 2016. In fact, the all accident rate (accidents per 1 million flights) improved to 1.08 in 2017 from 1.68 a year ago. The comparable figure was 2.01 for the 2012-2016 period.
Moreover, the rate for major jet accidents (jet hull losses per 1 million flights) came in at 0.11 in 2017, compared with the 2016 figure of 0.39. The figure also compared favorably with the 2012-2016 rate of 0.33. Additionally, in 2017, there were six fatal accidents (none involving a passenger jet) with 19 fatalities among passengers and crew.
This reading, too, is favorable with the 2016 figures of nine fatal accidents and 202 fatalities. In the 2012-2016 period, there was an average of 10.8 fatal accidents and approximately 315 fatalities per year.
4. The long-standing pay-related dispute between European low-cost carrier, Ryanair Holdings plc (RYAAY - Free Report) , and its pilots shows no signs of ending. According to a Reuters report, the European Employee Representative Council — formed in 2016 by pilots of the Irish carrier — demanded the resignation of Ryanair ‘s CEO Michael O‘Leary.
The unofficial pan-European body was of the opinion that O‘Leary had failed to tackle the issue effectively, resulting in many pilots quitting the company. Ryanair has, however, dismissed the demand.
5. An unfortunate child-related occurred on a Southwest Airlines flight (Phoenix-to-Portland) when a dog bit the girl on the plane. Southwest started reviewing its policy pertaining to onboard service animals, even before the occurrence of incident. In fact, not only Southwest but other carriers like Delta have been in the news recently regarding the issue.
Markedly, from Mar 1, 2018 the concerned passengers on Delta flights would need to furnish documents underlining the passenger's need for carrying the animal on the flight. Also, the person has to provide proof related to its training and vaccinations within 48 hours before the flight.
Performance
The following table shows the price movement of the major airline players over the past week and during the last six months.
The table above shows that most airline stocks traded in the green over the past week, buoyed by comments of Warren Buffett. Consequently, the NYSE ARCA Airline index increased 1.1% to $119.05 in the period. Over the course of six months, the NYSE ARCA Airline index appreciated 12.2% backed by robust gains at the likes of Gol Linhas Aéreas Inteligentes S.A. .
What's Next in the Airline Space?
Investors would look forward to February traffic reports from the likes of Delta in the coming days.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
Image: Bigstock
Airline Stock Roundup: Carriers Gain on Buffett Commentary, CPA in Focus
It was a week where billionaire investor, Warren Buffett, continued to show his affinity for airline stocks. In an interview to CNBC, the "Oracle of Omaha" did not reject the possibility of eventually owning an airline company, thereby displaying his recent interest in the space once again.
Warren Buffett, the world’s third richest man, has stakes in airline heavyweights — Delta Air Lines, Inc. (DAL - Free Report) , American Airlines Group Inc. (AAL - Free Report) , United Continental Holdings, Inc. (UAL - Free Report) and Southwest Airlines Co. (LUV - Free Report) — since 2016, after having shunned the sector for years.
On the earnings front, Copa Holdings, S.A. (CPA - Free Report) performed well in the fourth quarter outperforming revenues and earnings estimates. Moreover, Southwest Airlines featured in the news when a dog reportedly bit a child on one of its flights. In fact, the incident gained prominence as many airlines are considering changes in their respective policies pertaining to carrying animals on flights.
(Read the last Airline Stock Roundup for Feb 21, 2018).
Transportation - Airline Industry 5YR % Return
Transportation - Airline Industry 5YR % Return
Recap of the Past Week’s Most Important Stories
1. Copa Holdings’ earnings per share (excluding 2 cents from non-recurring items) of $2.36 surpassed the Zacks Consensus Estimate of $2.33. Moreover, the bottom line surged 66.2% year over year. Quarterly revenues also improved 12.4% on a year-over-year basis to $675.6 million and topped the consensus mark of $663.4 million.
The year-over-year improvement in the top line was primarily owing to 12.6% growth in passenger revenues. While passenger unit revenue per available seat mile (PRASM) climbed 3.2%, yield per passenger mile inched up 1.2%. Additionally, unit revenue per available seat mile (RASM) improved 2.9%. This apart, operating cost per available seat mile (CASM), excluding fuel, declined 6.7% in the reported quarter.
Passenger traffic (on a consolidated basis) rose 11.3% and capacity was up 9.2% in the quarter under review. Load factor expanded 160 basis points to 83.2% as traffic growth outweighed capacity increase.
Copa Holdings carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
2. Warren Buffett’s cash-rich Berkshire Hathaway is apparently eager to make "one or more huge acquisitions." However, the company has not yet found a suitable company to buy mainly due to valuation concerns. An airline company could foot the bill (airline stocks are inexpensive) and might be acquired by the iconic investor. This commentary of one of the most revered investors of all times positively impacted airline stocks.
3. According to data released by the International Air Transport Association (IATA), airlines fared better in 2017, as far as safety related performance was concerned, compared with 2016. In fact, the all accident rate (accidents per 1 million flights) improved to 1.08 in 2017 from 1.68 a year ago. The comparable figure was 2.01 for the 2012-2016 period.
Moreover, the rate for major jet accidents (jet hull losses per 1 million flights) came in at 0.11 in 2017, compared with the 2016 figure of 0.39. The figure also compared favorably with the 2012-2016 rate of 0.33. Additionally, in 2017, there were six fatal accidents (none involving a passenger jet) with 19 fatalities among passengers and crew.
This reading, too, is favorable with the 2016 figures of nine fatal accidents and 202 fatalities. In the 2012-2016 period, there was an average of 10.8 fatal accidents and approximately 315 fatalities per year.
4. The long-standing pay-related dispute between European low-cost carrier, Ryanair Holdings plc (RYAAY - Free Report) , and its pilots shows no signs of ending. According to a Reuters report, the European Employee Representative Council — formed in 2016 by pilots of the Irish carrier — demanded the resignation of Ryanair ‘s CEO Michael O‘Leary.
The unofficial pan-European body was of the opinion that O‘Leary had failed to tackle the issue effectively, resulting in many pilots quitting the company. Ryanair has, however, dismissed the demand.
5. An unfortunate child-related occurred on a Southwest Airlines flight (Phoenix-to-Portland) when a dog bit the girl on the plane. Southwest started reviewing its policy pertaining to onboard service animals, even before the occurrence of incident. In fact, not only Southwest but other carriers like Delta have been in the news recently regarding the issue.
Markedly, from Mar 1, 2018 the concerned passengers on Delta flights would need to furnish documents underlining the passenger's need for carrying the animal on the flight. Also, the person has to provide proof related to its training and vaccinations within 48 hours before the flight.
Performance
The following table shows the price movement of the major airline players over the past week and during the last six months.
The table above shows that most airline stocks traded in the green over the past week, buoyed by comments of Warren Buffett. Consequently, the NYSE ARCA Airline index increased 1.1% to $119.05 in the period. Over the course of six months, the NYSE ARCA Airline index appreciated 12.2% backed by robust gains at the likes of Gol Linhas Aéreas Inteligentes S.A. .
What's Next in the Airline Space?
Investors would look forward to February traffic reports from the likes of Delta in the coming days.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
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