Delta Air Lines (DAL - Free Report) kicked off the fourth-quarter 2023 earnings season for the airline industry on Jan 12, 2024. This Atlanta-based carrier reported better-than-expected earnings per share and revenues driven by buoyant holiday air travel demand.
The increased demand also aided the results of United Airlines (UAL - Free Report) , which reported its fourth-quarter 2023 numbers on Jan 22. At UAL, the top line increased 9.9% year over year. Notably, passenger revenues (which accounted for 91.1% of the top line) increased 10.9%. Almost 41,779 passengers traveled on UAL flights in the fourth quarter.
The encouraging demand scenario is also expected to have aided Allegiant Travel (ALGT - Free Report) , Spirit Airlines (SAVE - Free Report) and Frontier Group Holdings (ULCC - Free Report) record better-than-expected earnings per share for the December quarter.
Let’s delve deeper into the factors that are likely to boost the fourth-quarter results of the sector participants who are yet to report.
With air travel demand bouncing back strongly from the pandemic lows, results of the yet-to-report airline companies are likely to be impressive. Strong passenger volumes are likely to drive results this time around, thanks to the Thanksgiving and Christmas holiday periods that fall in the December quarter. What is more encouraging is that international demand has also bounced back nicely.
The decline in fuel expenses is another tailwind for the industry. Notably, oil price declined 10% in the October-December period. This bodes well for the bottom-line growth of airlines. This is because fuel expenses are a significant input cost for the aviation space.
Concerns about China and Germany's economic trajectories, high interest environments and record non-OPEC production from the United States, Canada, Brazil, Norway and Guyana, coupled with increased output in Iran, contributed to oil’s supply glut and the resultant price decline.
Here’s How to Pick the Right Stocks
Multiple airline stocks are likely to report earnings in the coming weeks. It is always a daunting task for investors to pick a winning basket of stocks with the potential to deliver better-than-expected earnings.
While there is no foolproof method of choosing outperformers, our proprietary methodology — the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — helps identify stocks with high chances of delivering a positive surprise in their upcoming earnings announcement. Our research shows that for stocks with this perfect mix of elements, the odds of an earnings beat are as high as 70%.
The Earnings ESP shows the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Our Choices
Allegiant Travel is based in Las Vegas. ALGT has an Earnings ESP of +80.07% and a Zacks Rank of 3, currently. ALGT is slated to report fourth-quarter 2023 results on Feb 5. Buoyant passenger revenues are likely to have aided Allegiant Travel’s performance in the to-be-reported quarter.
ALGT beat the Zacks Consensus Estimate in three of the last four quarters and missed the mark once, the average beat being 80.77%.
Spirit Airlines has an Earnings ESP of +8.74% and a Zacks Rank #3. SAVE will release fourth-quarter 2023 results on Feb 7. You can see the complete list of today’s Zacks #1 Rank stocks here.
Like ALGT, upbeat air travel demand is expected to have aided the fourth-quarter performance of this Miramar, FL-based ultra low-cost carrier. Recently, management gave a bullish revenue guidance for fourth-quarter 2023. Revenues are now expected to be $1.32 billion. The new guidance is at the high end of the airline’s previously guided range of $1.28-$1.32 billion. The bullish expectation is due to the fact that bookings for the peak travel period, Christmas and New Year, were strong.
SAVE beat the Zacks Consensus Estimate in three of the last four quarters and missed the mark once, the average beat being 47.75%.
Frontier Group Holdings is the parent company of Frontier Airlines. The company is headquartered in Denver, CO. ULCC currently has an Earnings ESP of +10.39% and a Zacks Rank #3. ULCC will release results on Feb 6. Like our other two choices, upbeat air travel demand is expected to have aided the fourth-quarter performance of this carrier.
ULCC has an excellent earnings surprise history. The company beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 13.52%.
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Delta Air Lines (DAL - Free Report) kicked off the fourth-quarter 2023 earnings season for the airline industry on Jan 12, 2024. This Atlanta-based carrier reported better-than-expected earnings per share and revenues driven by buoyant holiday air travel demand.
The increased demand also aided the results of United Airlines (UAL - Free Report) , which reported its fourth-quarter 2023 numbers on Jan 22. At UAL, the top line increased 9.9% year over year. Notably, passenger revenues (which accounted for 91.1% of the top line) increased 10.9%. Almost 41,779 passengers traveled on UAL flights in the fourth quarter.
The encouraging demand scenario is also expected to have aided Allegiant Travel (ALGT - Free Report) , Spirit Airlines (SAVE - Free Report) and Frontier Group Holdings (ULCC - Free Report) record better-than-expected earnings per share for the December quarter.
Let’s delve deeper into the factors that are likely to boost the fourth-quarter results of the sector participants who are yet to report.
With air travel demand bouncing back strongly from the pandemic lows, results of the yet-to-report airline companies are likely to be impressive. Strong passenger volumes are likely to drive results this time around, thanks to the Thanksgiving and Christmas holiday periods that fall in the December quarter. What is more encouraging is that international demand has also bounced back nicely.
The decline in fuel expenses is another tailwind for the industry. Notably, oil price declined 10% in the October-December period. This bodes well for the bottom-line growth of airlines. This is because fuel expenses are a significant input cost for the aviation space.
Concerns about China and Germany's economic trajectories, high interest environments and record non-OPEC production from the United States, Canada, Brazil, Norway and Guyana, coupled with increased output in Iran, contributed to oil’s supply glut and the resultant price decline.
Here’s How to Pick the Right Stocks
Multiple airline stocks are likely to report earnings in the coming weeks. It is always a daunting task for investors to pick a winning basket of stocks with the potential to deliver better-than-expected earnings.
While there is no foolproof method of choosing outperformers, our proprietary methodology — the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — helps identify stocks with high chances of delivering a positive surprise in their upcoming earnings announcement. Our research shows that for stocks with this perfect mix of elements, the odds of an earnings beat are as high as 70%.
The Earnings ESP shows the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Our Choices
Allegiant Travel is based in Las Vegas. ALGT has an Earnings ESP of +80.07% and a Zacks Rank of 3, currently. ALGT is slated to report fourth-quarter 2023 results on Feb 5. Buoyant passenger revenues are likely to have aided Allegiant Travel’s performance in the to-be-reported quarter.
ALGT beat the Zacks Consensus Estimate in three of the last four quarters and missed the mark once, the average beat being 80.77%.
Spirit Airlines has an Earnings ESP of +8.74% and a Zacks Rank #3. SAVE will release fourth-quarter 2023 results on Feb 7. You can see the complete list of today’s Zacks #1 Rank stocks here.
Like ALGT, upbeat air travel demand is expected to have aided the fourth-quarter performance of this Miramar, FL-based ultra low-cost carrier. Recently, management gave a bullish revenue guidance for fourth-quarter 2023. Revenues are now expected to be $1.32 billion. The new guidance is at the high end of the airline’s previously guided range of $1.28-$1.32 billion. The bullish expectation is due to the fact that bookings for the peak travel period, Christmas and New Year, were strong.
SAVE beat the Zacks Consensus Estimate in three of the last four quarters and missed the mark once, the average beat being 47.75%.
Frontier Group Holdings is the parent company of Frontier Airlines. The company is headquartered in Denver, CO. ULCC currently has an Earnings ESP of +10.39% and a Zacks Rank #3. ULCC will release results on Feb 6. Like our other two choices, upbeat air travel demand is expected to have aided the fourth-quarter performance of this carrier.
ULCC has an excellent earnings surprise history. The company beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 13.52%.
Zacks Names #1 Semiconductor Stock
It's only 1/9,000th the size of NVIDIA which skyrocketed more than +800% since we recommended it. NVIDIA is still strong, but our new top chip stock has much more room to boom.
With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $803 billion by 2028.
See This Stock Now for Free >>
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