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Buy These 3 Airline Stocks Soaring Amid Profit Sharing

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Delta Air Lines DAL announced on Valentine’s Day that the company is set to pay out more than $1 billion in profit sharing to its employees as part of its continued program to spread the wealth. Other U.S. airline firms also joined the party, and at the moment, this trend seems to be a sign of strength and stability in the industry.

The Atlanta-based airline company noted that this is the fourth straight year it will share over $1 billion with its employees. Delta boasted that its profit sharing program goes far beyond the recent wave of one-time payments that companies such as Comcast CMCSA and AT&T (T - Free Report) made after the new Republican tax reforms were enacted. The airline also noted that its total annual compensation has increased by 80% since 2008.

“Our industry-leading profit sharing and compensation philosophy reflects a decision we made a long time ago to share in the company’s success each year with our people who make it possible,” Delta CEO Ed Bastian said in a statement. “Rather than make a one-off payment like other companies, Delta is invested in highly competitive base pay, an industry-leading annual profit sharing plan, and monthly bonuses each year when the airline performs well.”

Delta might be leading the charge to distribute profits across the company, but it is certainly not alone. With that said, let’s take a look at three U.S. airline powers, including Delta, that have been able to share the wealth while maintaining a strong outlook. 

1.       Delta Air Lines, Inc. (DAL)

Prior to yesterday’s announcement, Delta employees received $1.1 billion in 2015; $1.5 billion in 2016, which the company cited as the largest corporate profit sharing payout in U.S. history; and another $1.1 billion in 2017. Amid this current tight labor market, Delta’s employee compensation plan could go a long way to securing a strong workforce. The company is currently a Zacks Rank #2 (Buy) and rocks an overall “B” VGM score, which is supported by its “A” grade for Value in our Style Scores system.

Investors should note that we have witnessed 10 upward earnings estimate revisions with 100% agreement to the upside for the company’s fiscal 2018. Based on our current Zacks Consensus Estimates, Delta is projected to see its earnings soar by nearly 29% in its current fiscal year. Amid this effort to share the wealth, Delta is also projected to expand its bottom-line at a healthy annualized rate of 11.60% over the next three to five years.

2.       Southwest Airlines Company LUV

In January, Southwest joined the list of companies that awarded employees bonuses of $1,000. On top of that, the Dallas-based airline announced last week that it would share $543 million through its profit sharing plan, which the company noted is equivalent to more than five weeks of pay. Southwest is currently Zacks Rank #2 (Buy) and sports an overall “A” VGM grade.

The low-cost airline giant also looks poised to continue to expand its bottom line, despite its commitments to spend more money on its employees. Our consensus estimate is moving higher on the back of strong analyst revision agreement for the current fiscal year. Southwest is expected to see its earnings surge 32.79% in the current quarter and 42.86% in 2018. Looking further down the road, Southwest is projected to expand its EPS figure at an annualized rate of 11.22% over the next three to five years.

3.       American Airlines Group, Inc. AAL

This U.S. airline giant is currently a Zacks Rank #2 (Buy) and boasts an “A” grade for Value and a “B” for Momentum. Like Southwest, American announced that it would pay out $1,000 bonuses to employees, which the company said would cost $130 million. American will also reportedly shell out another $241 million to its employees as part of a profit sharing program.

It does not appear that the company’s recent wave of profit sharing will hurt American’s bottom line. The airline firm is expected to see its earnings per share hit $5.80 in 2018, which would mark a nearly 19% increase. Investors should also be aware that American has earned 10 upward earnings estimate revisions with 100% agreement to the upside for 2018, as well as five for the following year.

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