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How Will the Airlines ETF (JETS) Fare This Earnings Season?
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Airlines have started releasing their quarterly numbers this week. The outlook is mixed this time thanks to economic reopening marred with a rise in energy costs. Let’s delve into the earnings picture of the big six airlines companies that could drive the performance of the sector ahead.
Notably, the pureplay airlines ETF U.S. Global Jets ETF (JETS - Free Report) (up 5.7%) beat the S&P 500 (down 6.4%) this year. The fund JETS is up 7.6% past month despite rise in fuel costs, breezing past flat returns in the S&P 500.
According to our methodology, a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) when combined with a positive Earnings ESP increases our chances of predicting an earnings beat, while companies with a Zacks Rank #4 or 5 (Sell rated) are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Delta Air Lines’ (DAL - Free Report) first-quarter 2022 loss (excluding 25 cents from non-recurring items) of $1.23 per share was narrower than the Zacks Consensus Estimate of a loss of $1.28. With Omicron hampering travel plans in the early part of the first quarter of 2022, the carrier incurred a loss after delivering earnings in the last two quarters of 2021.
However, with the threat of the omicron variant subsiding, air-travel demand was exceptionally strong in the month of March. Upbeat demand led to DAL earning a profit in March with the adjusted operating margin reaching almost 10%. Delta’s revenues came in at $9,348 million, which not only beat the Zacks Consensus Estimate of $9,063.5 million but also soared in excess of 100% from the year-ago figure.
United Airlines (UAL - Free Report) came out with a quarterly loss of $4.24 per share versus the Zacks Consensus Estimate of a loss of $4.19. This compares to loss of $7.50 per share a year ago. The airline posted revenues of $7.57 billion for the quarter ended March 2022, missing the Zacks Consensus Estimate by 1.19%. This compares to year-ago revenues of $3.22 billion. However, the company has topped consensus revenue estimates three times over the last four quarters.
Inside Our Surprise Prediction
Among the big six, Southwest Airlines (LUV - Free Report) , American Airlines (AAL - Free Report) , Alaska Air Group (ALK - Free Report) and JetBlue Airways (JBLU - Free Report) are yet to report earnings, at the time of writing.
JBLU, which is likely to report on Apr 26, has a Zacks Rank #3 and Earnings ESP of -1.36%.
LUV, which is likely to report on Apr 28, has a Zacks Rank #3 and an ESP of +28.09%.
AAL, which is likely to report on Apr 21, has a Zacks Rank #3 and an ESP of +3.01%.
ALK, which is likely to report on Apr 21, has a Zacks Rank #3 and an ESP of -0.30%.
Bottom Line
While the earnings picture of the industry may come out as uneven, some companies should be able to beat on at least topline due to rise in bookings (both Spring breaks and business travel) in March. This shows a moderate hope for recovery in the coming days. Office reopening should translate in an improvement in business travel demand.
A stronger fare environment to keep pace with the surge in fuel costs is another plus for the companies. Two stocks LUV and AAL have strong positive ESPs, pointing to a turning point of the pandemic-ridden airlines industry.
Investors should note that for the second quarter of this year, United Airlines is forecasting a 10% operating margin, and the highest quarterly sales in its history, with revenue per passenger mile up 17% over 2019, as higher fares offset a spike in expenses.
If there is a steady improvement in the coronavirus scenario globally, one can surely see a jump in this otherwise-undervalued product JETS. However, any kind of worsening in the COVID situation may harm the fund over the medium term.
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How Will the Airlines ETF (JETS) Fare This Earnings Season?
Airlines have started releasing their quarterly numbers this week. The outlook is mixed this time thanks to economic reopening marred with a rise in energy costs. Let’s delve into the earnings picture of the big six airlines companies that could drive the performance of the sector ahead.
Notably, the pureplay airlines ETF U.S. Global Jets ETF (JETS - Free Report) (up 5.7%) beat the S&P 500 (down 6.4%) this year. The fund JETS is up 7.6% past month despite rise in fuel costs, breezing past flat returns in the S&P 500.
According to our methodology, a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) when combined with a positive Earnings ESP increases our chances of predicting an earnings beat, while companies with a Zacks Rank #4 or 5 (Sell rated) are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Delta Air Lines’ (DAL - Free Report) first-quarter 2022 loss (excluding 25 cents from non-recurring items) of $1.23 per share was narrower than the Zacks Consensus Estimate of a loss of $1.28. With Omicron hampering travel plans in the early part of the first quarter of 2022, the carrier incurred a loss after delivering earnings in the last two quarters of 2021.
However, with the threat of the omicron variant subsiding, air-travel demand was exceptionally strong in the month of March. Upbeat demand led to DAL earning a profit in March with the adjusted operating margin reaching almost 10%. Delta’s revenues came in at $9,348 million, which not only beat the Zacks Consensus Estimate of $9,063.5 million but also soared in excess of 100% from the year-ago figure.
United Airlines (UAL - Free Report) came out with a quarterly loss of $4.24 per share versus the Zacks Consensus Estimate of a loss of $4.19. This compares to loss of $7.50 per share a year ago. The airline posted revenues of $7.57 billion for the quarter ended March 2022, missing the Zacks Consensus Estimate by 1.19%. This compares to year-ago revenues of $3.22 billion. However, the company has topped consensus revenue estimates three times over the last four quarters.
Inside Our Surprise Prediction
Among the big six, Southwest Airlines (LUV - Free Report) , American Airlines (AAL - Free Report) , Alaska Air Group (ALK - Free Report) and JetBlue Airways (JBLU - Free Report) are yet to report earnings, at the time of writing.
JBLU, which is likely to report on Apr 26, has a Zacks Rank #3 and Earnings ESP of -1.36%.
LUV, which is likely to report on Apr 28, has a Zacks Rank #3 and an ESP of +28.09%.
AAL, which is likely to report on Apr 21, has a Zacks Rank #3 and an ESP of +3.01%.
ALK, which is likely to report on Apr 21, has a Zacks Rank #3 and an ESP of -0.30%.
Bottom Line
While the earnings picture of the industry may come out as uneven, some companies should be able to beat on at least topline due to rise in bookings (both Spring breaks and business travel) in March. This shows a moderate hope for recovery in the coming days. Office reopening should translate in an improvement in business travel demand.
A stronger fare environment to keep pace with the surge in fuel costs is another plus for the companies. Two stocks LUV and AAL have strong positive ESPs, pointing to a turning point of the pandemic-ridden airlines industry.
Investors should note that for the second quarter of this year, United Airlines is forecasting a 10% operating margin, and the highest quarterly sales in its history, with revenue per passenger mile up 17% over 2019, as higher fares offset a spike in expenses.
If there is a steady improvement in the coronavirus scenario globally, one can surely see a jump in this otherwise-undervalued product JETS. However, any kind of worsening in the COVID situation may harm the fund over the medium term.