For Immediate Release
Chicago, IL – January 10, 2017, 2016 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include American Airlines Group Inc. (NASDAQ: (AAL - Free Report) – Free Report ), SkyWest, Inc. (NASDAQ: (SKYW - Free Report) – Free Report ), Hawaiian Holdings, Inc. (NASDAQ: (HA - Free Report) – Free Report ), LATAM Airlines Group S.A. (NYSE: – Free Report ), Deutsche Lufthansa Aktiengesellschaft (OTCMKTS: (DLAKY - Free Report) – Free Report ) and International Consolidated Airlines Group, S.A. (OTCMKTS:(ICAGY - Free Report) – Free Report ).
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Here are highlights from Monday’s Analyst Blog:
5 Airline Stocks Set to Fly High in 2017
It’s time for airline investors to buckle up as 2017 may be another strong year. Revenue per available seat mile (RASM) is projected to increase at a steady clip, while imminent investors like Warren Buffett who has spent most of his life decrying airline investing, recommitted to the industry in November.
Thanks to several years of restructuring and re-engineering of businesses, the airline industry is way more resilient now. The International Air Transport Association (IATA) expects the global airline industry to register a solid $30 billion in profits this year. Lest we forget, the industry posted its highest ever profits last year. Banking on such factors, it will be prudent to invest in fundamentally sound airline companies.
Airline Stocks to Soar This Year
Airline stocks are presumed to stay hot in 2017, courtesy of several factors. Most analysts track the industry metric RASM which determines the revenue generated by one passenger flying one mile. The metric has been registering a rise of late. RASM declined for the 20th successive month, while international RASM dropped for the 30th month in a row.
Higher fuel prices, however, seems more likely this year, which will drive RASM. Crude oil prices have more than doubled from a 2016 low of $26 per barrel, while several analysts’ believe that it may go up further.
Major airlines, in the meantime, seem committed to increase in capacity. According to Stifel analyst Joseph DeNardi, domestic capacity growth is estimated to increase 3.25%, including 2% growth at Delta, 2.25% at United Continental and 2% at Southwest this year. He added that such an increase in supply growth along with 3%–3.5% growth in GDP will support an increase in RASM, domestically. The third-quarter output of goods and services had already increased at an annual rate of 3.5%, according to the ‘third” estimate by the Bureau of Economic Analysis.
There is also a marked change in the perceptions regarding the airline industry. Buffett, who had been publicly denouncing airline investments, ventured into the space on Nov 14, buying shares valued at about $1.3 billion as of Sep 30.
IATA: Airline Industry to See $30B in Profits
According to the IATA, the global airline industry is forecasted to see strong net profit of $29.8 billion, with 4 billion travelers projected to take to the sky. The earnings represent a 4.1% net profit margin on the back of expected total revenue of $736 billion. IATA director-general and chief executive officer Alexandre de Juniac mentioned a few challenges in the form of low global passenger load factor which will likely be offset by the projected rise in world GDP by 2.5%, up 2.2% from last year. Airlines around the world have already generated approximately $35.6 billion in profits during 2016, the highest for the global airline industry.
North American airlines are anticipated to deliver the strongest financial performance this year, with net profits of $18.1 billion. Meanwhile, Asia Pacific airlines are expected to record earnings of $6.3 billion followed by estimated earnings of $5.6 billion from European airlines. Juniac added that capacity offered by the region’s carriers is forecasted to grow 7.6%, ahead of an earlier forecast of 7%, thanks to expansion of new airlines and liberalization.
Optimism surrounding the air cargo business this year has also improved. Cargo industry volume is expected to reach a new high of 55.7 million tons this year, up from 53.9 million tons last year, while revenue for air cargo is expected to rise slightly to $49.40 billion.
5 Airline Stocks to Buy Now
Given such optimistic predictions, it’s worth investing in the airline space this year. Buffet, to whom the industry was a “death trap” back in 2013, has changed his tune last year, with his investments in four major airlines have been anything but lethal so far. Since his public announcement, shares of Delta, American Airlines Group Inc. (NASDAQ: (AAL - Free Report) – Free Report ), Southwest and United jumped 6%, 7%, 13% and 14%, respectively.
We have thus selected five solid airline stocks that flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy) and a VGM Score of ‘A’ or ‘B.’ Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three metrics. Such a score allows you to eliminate the negative aspects of stocks and select winners.
SkyWest, Inc. (NASDAQ:(SKYW - Free Report) – Free Report ) operates as a regional airline in the U.S. It provides scheduled passenger and air freight services in the U.S., Canada, Mexico and the Caribbean. SkyWest has a Zacks Rank #2 and a VGM Score of ‘A.’ The Zacks Consensus Estimate for its current year earnings increased 0.7% over the last 60 days. In the past one year, SkyWest’s shares recorded an average return of 137.37% compared to the Zacks categorized Transportation-Airline industry’s return of 16.89%.
Hawaiian Holdings, Inc. (NASDAQ:(HA - Free Report) – Free Report ) engages in the scheduled air transportation of passengers and cargo. It offers daily services on North America routes. Hawaiian Holdings has a Zacks Rank #1 and a VGM Score of ‘A.’ The Zacks Consensus Estimate for its current year earnings advanced 2.4% over the last 60 days. Over the last one-year period, Hawaiian Holdings’ shares recorded an average return of 72.25%.
LATAM Airlines Group S.A. (NYSE: – Free Report ) provides passenger and cargo air transportation services in America, Europe and Oceania. LATAM Airlines Group has a Zacks Rank #2 and a VGM Score of ‘B.’ The Zacks Consensus Estimate for its current year earnings improved 3.4% over the last 30 days. In the last one-year period, LATAM Airlines’ shares yielded an average return of 64.57%.
Deutsche Lufthansa Aktiengesellschaft (OTCMKTS:(DLAKY - Free Report) – Free Report ) operates as an aviation company in Germany and internationally. It operates through Passenger Airline Group, Logistics, MRO, and Catering segments. Deutsche Lufthansa has a Zacks Rank #1 and a VGM Score of ‘A.’ The Zacks Consensus Estimate for its current year earnings increased 4.9% over the last 60 days. Over the last three months, Deutsche Lufthansa’s stock recorded an average return of 25.3%. You can see the complete list of today’s Zacks #1 Rank stocks here .
International Consolidated Airlines Group, S.A. (OTCMKTS:(ICAGY - Free Report) – Free Report ) engages in the provision of passenger and cargo transportation services in the U.K., Spain, the U.S. and rest of the world. The company sports a Zacks Rank #1 and a VGM Score of ‘A.’ The Zacks Consensus Estimate for its current year earnings rose 9.5% over the last 30 days. Over the past three months, International Consolidated Airlines’ shares recorded an average return of 26.2%.
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