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5 Reasons Airlines Are Set for a Turbulence-Free 2023
Turbulent Times for Airlines
It turns out that transporting thousands of passengers around the world in a metal tube is no easy task. The airline industry is one of the most complicated industries to predict on Wall Street. Like most industries, airlines have inputs and outputs, the sum of which ultimately leads to profitability or large losses. Over the past few years, airlines have had to contend with the following:
· A Global Pandemic: Shrank demand to nearly zero and decreased the number of employees.
· Complex Geopolitical Circumstances: The War in Ukraine drove crude oil prices to near triple digits before pulling back last year.
· Lack of Skilled Employees: Many pilots in the industry aged, some quit, and others were laid off during the pandemic.
· Outdated Airplanes: Supply chain issues and delays due to safety concerns from aircraft manufacturersled to a lack of airplanes.
Despite the many challenges mentioned above, the airline industry is showing signs of life.
Clear Skies Ahead?
Below I will lay out 5 reasons why the tough times experienced by airlines in recent years may finally be over:
1. A Return to Profitability: International airlines survived massive losses during the pandemic and are now back to earning healthy profits. For example, United Airlines lost $28 per share in 2020. In 2022, UAL made $2.50 per share.
Panamanian airline Copa Holdings and other international airlines show a similar EPS trajectory.
2. Rising EPS Estimates: Airline providers such as American Airlines,Ryanair and United have rising consensus estimates moving forward. AAL and UAL also have positive Expected Surprise Prediction (ESP) scores suggesting that they are likely to surprise earnings to the upside the next time they report. Delta is one of the few airline stocks with a negative ESP score. That said, Delta is coming off a blockbuster quarter where EPS rocketed 573%.
4. Recovery to Pre-pandemic Levels: Recently, Boeing Ceo Dave Calhoun confirmed his aspirations to return to pre-pandemic aircraft production levels. Airline giants like United are planning to hire thousands of pilots in 2023 to increase staff – with no training capacity constraints. Meanwhile, air travel occupancy levels have recovered fully.
5. Drastically Improving Technical Picture:
Uptrend Resumed: After five failed attempts to re-take the 200-day moving average in the past two years, the JETS ETF decisively broke above the line in 2023 – signaling a distinct change in character.
Post Earnings Drift Potential / Bull Flags: Because markets are inefficient, stocks tend to trend after reporting stellar earnings like most airlines just did. Stocks like UAL rocketed higher in early 2023 and have been consolidating and digesting gains in a bullish manner since.
Why Haven’t You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +6.2 average gain per year. Amazingly, they soared with average gains of +46.4%, +49.5% and +55.2% per year. Today you can access their live picks without cost or obligation.
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.
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Zacks Investment Ideas feature highlights: United Airlines, Copa, American Airlines, Ryanair and Delta
For Immediate Release
Chicago, IL – February 8, 2023 – Today, Zacks Investment Ideas feature highlights United Airlines (UAL - Free Report) , Copa Holdings (CPA - Free Report) , American Airlines (AAL - Free Report) , Ryanair (RYAAY - Free Report) and Delta (DAL - Free Report) .
5 Reasons Airlines Are Set for a Turbulence-Free 2023
Turbulent Times for Airlines
It turns out that transporting thousands of passengers around the world in a metal tube is no easy task. The airline industry is one of the most complicated industries to predict on Wall Street. Like most industries, airlines have inputs and outputs, the sum of which ultimately leads to profitability or large losses. Over the past few years, airlines have had to contend with the following:
· A Global Pandemic: Shrank demand to nearly zero and decreased the number of employees.
· Complex Geopolitical Circumstances: The War in Ukraine drove crude oil prices to near triple digits before pulling back last year.
· Lack of Skilled Employees: Many pilots in the industry aged, some quit, and others were laid off during the pandemic.
· Outdated Airplanes: Supply chain issues and delays due to safety concerns from aircraft manufacturersled to a lack of airplanes.
Despite the many challenges mentioned above, the airline industry is showing signs of life.
Clear Skies Ahead?
Below I will lay out 5 reasons why the tough times experienced by airlines in recent years may finally be over:
1. A Return to Profitability: International airlines survived massive losses during the pandemic and are now back to earning healthy profits. For example, United Airlines lost $28 per share in 2020. In 2022, UAL made $2.50 per share.
Panamanian airline Copa Holdings and other international airlines show a similar EPS trajectory.
2. Rising EPS Estimates: Airline providers such as American Airlines, Ryanair and United have rising consensus estimates moving forward. AAL and UAL also have positive Expected Surprise Prediction (ESP) scores suggesting that they are likely to surprise earnings to the upside the next time they report. Delta is one of the few airline stocks with a negative ESP score. That said, Delta is coming off a blockbuster quarter where EPS rocketed 573%.
4. Recovery to Pre-pandemic Levels: Recently, Boeing Ceo Dave Calhoun confirmed his aspirations to return to pre-pandemic aircraft production levels. Airline giants like United are planning to hire thousands of pilots in 2023 to increase staff – with no training capacity constraints. Meanwhile, air travel occupancy levels have recovered fully.
5. Drastically Improving Technical Picture:
Uptrend Resumed: After five failed attempts to re-take the 200-day moving average in the past two years, the JETS ETF decisively broke above the line in 2023 – signaling a distinct change in character.
Post Earnings Drift Potential / Bull Flags: Because markets are inefficient, stocks tend to trend after reporting stellar earnings like most airlines just did. Stocks like UAL rocketed higher in early 2023 and have been consolidating and digesting gains in a bullish manner since.
Why Haven’t You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +6.2 average gain per year. Amazingly, they soared with average gains of +46.4%, +49.5% and +55.2% per year. Today you can access their live picks without cost or obligation.
See Stocks Free >>
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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.