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US Airlines Make Hay in Yesterday's Trading: Here's Why

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Wednesday, Dec 6, saw U.S. airline stocks perform exceedingly well on the bourses. Shares of industrial heavyweights like Delta Air Lines (DAL - Free Report) , American Airlines (AAL - Free Report) and United Airlines (UAL - Free Report) gained 3.54%, 2.67% and 3.38%, respectively, on Dec 6 over Dec 5’s closing. Consequently, the NYSE ARCA Airline Index appreciated 2.19% at the close of trading on Dec 6.

All of the above-mentioned companies currently carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

What Led to the Northward Price Movement?

The catalyst behind the impressive performance on the bourses was the bullish commentary of Delta’s management at the Morgan Stanley Global Consumer & Retail Conference. After a record-breaking performance during the Thanksgiving holiday period, management expects another rosy performance in terms of traffic during Christmas, thereby ending the year on a strong note.

We remind investors that more than 5.3 million customers availed of DAL flights between Nov 17 and Nov 26. DAL operated more than 43,000 flights systemwide during this period to meet the buoyant air travel demand witnessed during the Thanksgiving holiday period.

At the investor event, management also sounded optimistic about international air travel in 2024 and stated that its performance with respect to Trans-Atlantic travel had been particularly strong in the current year, leading to a significant increase in capacity to meet the buoyant demand scenario. Management expects the strong Trans-Atlantic performance to continue next year, as advanced bookings remain strong and are anticipated to pick up as we approach March.

Highlighting that air travel demand has held up well over the past few weeks, DAL maintained the fourth-quarter and 2023 outlook that it provided in October with its third-quarter results. Fourth-quarter earnings are expected to be $1.05-$1.30 per share. The Zacks Consensus Estimate for the same is pegged at $1.15 per share.

The adjusted operating margin in the December quarter is expected to be 9-11%. Management projects fourth-quarter total revenues (adjusted) to increase 9-12% on a year-over-year basis. DAL continues to anticipate adjusted earnings of $6.00-$6.25 per share for 2023. The Zacks Consensus Estimate for the same is pegged at $6.10 per share. For 2023, the adjusted operating margin is expected to be 11.5%. Management projects full-year total revenues (adjusted) to increase 20% on a year-over-year basis.

Airlines Regain Mojo Ahead of Year-end 

The record traffic during the Thanksgiving period has provided the much-needed boost to airline stocks after a tough few months due to headwinds like high labor and fuel costs, and a slowdown in domestic air travel demand. We note that airline stocks have been performing well of late and the uptick on Dec 6 was part of that uptrend.

Over the past month, stocks in the Zacks Airline industry have gained 11.5%, handily outperforming the S&P 500’s 3.9% appreciation.


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Similar to DAL, American Airlines and United Airlines have attracted huge traffic in the Thanksgiving travel period. AAL flights attracted 6.5 million customers over the Thanksgiving holiday, thereby establishing a record for the airline, with Nov 26 being its busiest day. UAL flights, too, were packed, with a record 3.2 million passengers flying between Nov 17 and Nov 23.

The upbeat air-traffic scenario apart, the decline in oil price from the 2023 highs reached in late September bodes well for airlines. This is because expenses on fuel represent significant input costs for airlines.

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