|From: Sam||4/13/2021 1:03:31 PM|
|Airline Stocks May Be Hitting an Air Pocket -- Barrons.com|
|Dow Jones Newswires April 13, 2021 11:12:00 AM ET |
Airline stocks may be hitting an air pocket.
American Airlines Group (ticker: AAL) issued preliminary first-quarter results on Tuesday morning that missed Wall Street forecasts, a day after United Airlines Holdings (UAL) issued tepid guidance for its first-quarter results.
American said in a filing that it expects revenue to be down 62% versus the first quarter of 2019, in the middle of its prior guidance of a 60%-65% decline. The carrier said it expects to post an adjusted loss of $4.29 to $4.41 a share, versus consensus estimates of a loss of $3.93.
On the brighter side, American said its daily operating losses in the quarter would be $27 million, down from a prior estimate of $30 million. The carrier said it would have turned cash-flow positive in March if not for debt and severance payments.
The company is expected to report first-quarter results on April 22.
The results look "worse than expected," wrote Citigroup analyst Stephen Trent, who maintained a Sell rating on the stock and a $21 price target.
Shares of American were down 2.8% in recent trading to around $22. The NYSE Arca Airline Index was off 1.7%. The U.S. Global Jets exchange-traded fund (JETS) was down 1.2%.
The sector could also be under pressure due to fears that Covid-19 vaccination rollouts might be slowing. That's becoming more likely now that health concerns have emerged about Johnson & Johnson's (JNJ) shot, adding to delays in output. Health officials are also warning of sharp increases in new Covid cases in some parts of the country, which appear unrelated to vaccination levels.
The warnings from American and United may be a sign that investors need to temper their expectations for more gains in the stocks. The NYSE Arca Airline index has rallied 25% this year and is up 75% in the last six months, pushing many of the stocks to their prepandemic highs and sending multiples up sharply.
While carriers have plenty of cash and liquidity to survive another downturn, many have strained their balance sheets and issued more equity to raise capital, pushing out an eventual recovery in earnings per share.
None illustrate that more than American. Its fully diluted share count hit 572,000 at the end of 2020, up 31% from the end of 2019. The airline now has an estimated $33.5 billion in net debt, up from $24 billion in 2019.
Yet while revenue is rebounding, it isn't expected to get back to prepandemic levels until 2024, according to consensus estimates. And meaningful profits aren't expected until 2023, when American is forecast to earn $2.39 a share.
Nonetheless, betting against American's stock on valuation concerns or fundamentals hasn't been a winning strategy. The stock has beaten the sector average with a 78% return over the past six months, and it has nearly doubled the sector's return in the past three months, gaining 40% versus 24% for the index.
Some analysts argue that other stocks look better positioned heading into the quarter, though.
UBS'sMyles Walton wrote on Tuesday that he's recommending shares of Alaska Air Group (ALK) as his top pick in the run-up to earnings. The company is making progress toward cash profitability, he notes, and may have more upside in filling available seats than other carriers.
Raymond James' Savanthi Syth reiterated a Strong Buy on shares of Allegiant Travel (ALGT) and raised her target to $290 on Monday. The company is in a "unique position" to generate higher profitability in 2022 than in 2019 due to strong demand trends in its core leisure market, she argues. Allegiant also made it through pandemic without diluting shareholders or stressing its balance sheet, which looks quite strong, she adds.
Alaska Air shares were down 2.5%, at $69.55, in recent trading. Allegiant shares were down 2.3%, at $243.64.
Write to Daren Fonda at email@example.com
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|From: Sam||4/14/2021 8:12:46 AM|
|Another timely upgrade and PT raise from JPM.|
Southwest Airlines Price Target Raised to $66.00/Share From $44.00 by JP Morgan
Southwest Airlines Raised to Neutral From Underweight by JP Morgan
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|To: Sam who wrote (1572)||4/15/2021 10:20:48 AM|
|Delta posts nearly $1.2 billion quarterly loss, expects to break even in June as bookings improve|
By Leslie Josephs - APR 15 20219:58 AM EDT
* Delta says domestic leisure bookings have recovered to 85% of 2019 levels.
* The airline expects to break even in June but still expects to post a pretax loss of up to $1.5 billion in the second quarter.
* Delta’s cash burn turned positive in March, generating $4 million a day.
Delta Air Lines on Thursday reported another quarterly loss but said it will likely break even in June as travel demand rebounds from a deep pandemic slump.
Delta and its competitors continue to lose money but have grown upbeat about an improvement in bookings as more travelers are vaccinated, travel restrictions lift and more attractions reopen. The airline said domestic leisure bookings recovered to about 85% of 2019 levels, though international and business travel remain depressed.
The Atlanta-based carrier posted a net loss of $1.18 billion on $4.15 billion in revenue for the first quarter, topping analyst estimates for sales of $3.91 billion. Revenue was down 60% compared with the $10.47 billion Delta generated in the first quarter of 2019. On an adjusted basis, Delta posted a loss of $3.55 a share compared with a forecast of $3.17 per share.
Delta’s shares were down more than 2% in morning trading.
Bookings in March doubled f rom January, CEO Ed Bastian told CNBC’s ? Squawk on the Street.” However, he added that corporate travel demand is just 20% of the norm for this time of year.
“When I look at the first quarter, what’s been clear to us is that our business has made a turn,” Bastian said. “We’ve seen a huge surge in bookings just over the last couple of months.”
Bastian said in an earnings release the company expects “positive cash generation for the June quarter and see a path to return to profitability in the September quarter as the demand recovery progresses.”
Here’s how Delta performed in the first quarter compared with what Wall Street expected, based on average estimates compiled by Refinitiv:
Adjusted results per share: a loss of $3.55 versus an expected loss of $3.17 a share
Total revenue: $4.15 billion versus expected $3.91 billion in revenue
Delta forecast its second-quarter revenue to be 50% to 55% lower than the same period of 2019 on scheduled capacity that’s a third lower than two years ago. Its expenses, stripping out the cost of fuel, will be up 6% to 9% this quarter, it said.
The carrier is the last U.S. airline to block middle seats, a practice that began earlier in the pandemic to help customers feel more comfortable flying. Next month, Delta will abandon that practice.
A Centers for Disease Control and Prevention study published Wednesday said that laboratory modeling that physically distancing passengers on board could reduce exposure to the virus that causes Covid-19 by up to 57%. The study didn’t account for facemasks, which are federally required on flights.
Bastian defended the decision to sell all seats on Delta’s planes and dismissed the study’s conclusions because researchers didn’t take pandemic safety protocols into effect.
“Our experts tell us that with vaccination rates where they’re at and demand being as strong as it is it’s absolutely safe to sit in that middle seat,” he said.
The carrier’s executives will hold a call with analysts to discuss results at 10 a.m. ET.
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|To: OldAIMGuy who wrote (1564)||4/15/2021 10:38:49 AM|
|Blocking middle seats on planes reduces risk |
of COVID-19 transmission, CDC study says
Empty middle seats have been a sticking point for some on
commercial flights since the pandemic began. But little by
little, major airlines have unblocked the middle seat to allow
more travelers to fly.
Now, new data from the Centers for Disease Control and
Prevention suggests this might not be the safest route. The
data was based on laboratory modeling of SARS-CoV-2
(the virus that causes COVID-19) on single-aisle and twin-
aisle planes. It found that leaving the middle seat vacant
reduces the risk of contracting COVID-19 by 23 percent
to 57 percent when compared with having a full plane.
For a single passenger in the same row and two seats away
from someone infected with COVID-19, the risk of exposure
to the virus was reduced by 23 percent. However, blocking
the middle seat reduces the risk to other passengers by up to
57 percent when several people aboard the aircraft are infected.
More at: yahoo.com
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|From: Sam||4/19/2021 6:15:14 AM|
|United and 4 Other Airlines Report Earnings This Week. Here's What to Expect. -- Barrons.com|
|Dow Jones Newswires April 19, 2021 05:59:00 AM ET |
March may have been the tipping point for airlines to get back to operating profits. Travel is recovering as vaccinations increase, flights are getting packed, and the days of bargain-basement fares may be fast receding.
Those trends have made the sector a winning bet this year: The NYSE Arca Airline Index is up about 26% versus an 11.5% gain for the S&P 500.
But investors are now looking ahead to summer bookings, and it may take some upbeat forecasts to push the stocks up even more.
We'll find out more about the industry's financial health and outlook this week as five carriers report first- quarter results, following on Delta Air Lines' (ticker: DAL) release last week.
United Airlines Holdings (UAL) kicks off the week with first-quarter results due Monday after the close. United already issued preliminary figures, saying it expects revenues of $3.2 billion in the quarter, down 66% from the first quarter of 2019. That revenue figure fell short of Wall Street's forecasts, though United made progress on turning a corner to profitability, saying it turned cash-positive in March.
The airline is expected to rack up a pretax loss of $2.8 billion and a loss of $7.05 in adjusted earnings per share in the quarter.
If United's stock follows in the path of Delta, however, it could sell off. While Delta's first-quarter results largely met Wall Street forecasts, its outlook was weaker than anticipated, pulling its stock down 2.8% the day it released earnings.
Delta also indicated the recovery is being fueled by leisure travel, while business and international fares remain down more than 80% from pre-pandemic levels. That is pressuring the airline's unit economics, including its revenue yields per flight. Without higher-margin business and international fares, total revenue may take longer to recover and operating margins may stay weak. United is also a full-service carrier that may face similar struggles.
Wall Street is now focusing on pricing as a lever for the stocks. "We believe domestic traffic is back, but pricing is lagging, and we want to know how they are thinking about raising fares through the summer," wrote Cowen analyst Helane Becker in a note on Friday.
The other big carrier on tap is American Airlines Group (AAL), slated to report results on Thursday before the market opens.
American has also primed Wall Street with preliminary figures, expecting revenue to be down 62% from the first quarter of 2019, at the midpoint of its prior forecasts. The company projected a net loss of $2.7 billion to $2.8 billion (excluding tax credits and other benefits of about $2 billion, mainly from Cares Act funding). And it forecast a net loss of $4.29 to $4.41 a share, excluding special credits, compared with consensus forecasts for a loss of $4.23.
American will need to deliver a healthy outlook to move its stock up, following a 76% gain over the last six months. That may be getting tougher, considering its reliance on international routes. American's operating expenses include much higher interest expenses, and its share count has been heavily diluted through equity issuance.
Morgan Stanley analyst Ravi Shanker, for instance, sees the stock trading down to $20, from recent prices around $ 22. "We believe AAL stock will rise with the industry tide of returning air traffic and we like its young aircraft fleet which could limit capex pressure in the critical years ahead," he wrote in a note last week. "However, with the stock up over 50% YTD, positioning is no longer skewed as negative as it used to be, which raises the bar."
The last three airlines slated to report are Southwest Airlines (LUV), Spirit Airlines (SAVE), and Alaska Air Group (ALK), all scheduled for Thursday.
The trio largely focus on the domestic leisure market and should be seeing some of the biggest revenue recoveries. None have warned that results will fall short of forecasts. Alaska issued a largely positive early read on the quarter.
Wall Street expects Southwest to post revenues of $2.1 billion and a pretax loss of $1.3 billion. The carrier is forecast to post an adjusted loss of $1.86 a share.
Southwest should benefit from getting its Boeing (BA) MAX planes back into service and an increase in corporate bookings now that it has joined a global booking system. The airline's domestic network is also in the sweet spot of the recovery, notes Shanker. The analyst raised his price target on the stock to $80, implying gains of nearly 30% from recent prices around $62.
The challenge with Southwest's stock is valuation, though. It's trading at 20 times 2022 earnings and 13 times estimated 2023 earnings, at the higher end of industry averages.
Spirit should be in position to meet or beat forecasts: It's an ultra-low-cost carrier oriented to domestic leisure and vacation travel. Wall Street is looking for revenue of $459 million and a pretax loss of $329 million. Adjusted earnings are forecast at a loss of $2.67 per share.
Yet Spirit's stock has soared so much -- up 128% in the last six months -- that it may be getting tougher to lift it from here. Raymond James' Savanthi Syth increased her 2021 EPS estimates slightly last week, for instance, but maintained a Market Perform rating on the shares.
"We believe Spirit is exposed to markets seeing strong demand and fare recovery heading into 2Q21," she wrote. But the airline is also shouldering higher interest expenses and has issued equity, diluting earnings per share. And since Spirit already had a lean cost structure heading into the downturn, it hasn't been able to generate as much savings as other carriers.
Alaska Air, for its part, has primed investors to expect a positive quarter. The airline said in a filing last week that it sees revenue down 33% from the January 2019 quarter, in line with its prior forecast. It expects passenger revenues to be down 55%, matching the higher end of its prior forecast, and it is expecting cash flow from operations of $150 million, beating its prior forecast for $50 to $100 million.
The big hurdle for Alaska's investors may be the shares' run-up. The stock is up 76% in the last six months to recent prices around $69. Wall Street's average price target is $83. That's an attainable goal, though investors may need to stay seated for a while.
Write to Daren Fonda at firstname.lastname@example.org
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|To: Moonray who wrote (1577)||4/22/2021 12:46:13 PM|
|Airlines Are Issuing Upbeat Forecasts. Investors Aren't Impressed. -- Barrons.com|
|Dow Jones Newswires April 22, 2021 11:56:00 AM ET |
First-quarter results from Southwest Airlines, Spirit Airlines, Alaska Air Group, and American Airlines Group have now landed. The market doesn't seem impressed.
Of the four carriers that reported earnings, Southwest (LUV) and Spirit (SAVE) were the only stocks in positive territory on Thursday, while Alaska (ALK) was flat and American (AAL) were up about 0.5%.
Quarterly results from the carriers were a mixed bag. The airlines all struck an upbeat tone on second-quarter guidance, expecting ongoing recoveries in flight capacity and revenues. All turned cash positive on an operating basis in March. And all expect the summer travel season to be healthy for domestic routes.
But the sector has been such a winner--up 61% in the last six months, including a 23% gain this year--that it may take much stronger forecasts to lift the stocks. Most of the stocks now trade less than 10% below Wall Street's average targets. Revenue and profit estimates may have to rise or the market will need to assign higher multiples for the stocks to move significantly higher.
While planes and airports are now filling up, operating costs could be heading higher as jet fuel prices climb and companies add back flight capacity. That, in turn, could keep earnings per share depressed, even as revenues increase.
As expected, airlines focused on domestic leisure travel are performing better than the full-service international carriers--largely because of border closures and a lack of business travel.
Southwest, for instance, slightly missed revenue estimates, but beat on the bottom line. The airline reported revenue of $2.05 billion, missing forecasts by $17 million. But Southwest eked out a GAAP profit of $116 million, or 19 cents a share, helped by $1.2 billion in federal bailout funds.
Southwest CEO Gary Kelly said in an earnings release that the airline was seeing "significant pent-up demand for leisure travel" and was optimistic about summer travel. Southwest is now adding more flights for June, expecting available seat miles to be only slightly below levels in June, 2019.
Also encouraging was Southwest's guidance on cash flow. The airline turned cash positive in March, including cash from future bookings, generating $4 million a day in positive cash flow. It is now targeting June as the month for breaking even on core cash flow.
Southwest is getting a lift from the Boeing (BA) 737 MAX returning to service. The airline reiterated that it had placed "100 firm orders" for additional MAX aircraft. The plane is more fuel-efficient than older aircraft and should help Southwest offset higher jet fuel prices, which have risen sharply over the last six months.
Bernstein analyst David Vernon, for one, like the results. "Our first look at LUV results is constructive," he wrote in a note, "as the leisure-led recovery should result in revenue that is 10% ahead of the Street in the second quarter and cost controls result in a more moderate loss." He maintained an Outperform rating on the stock and a $69 price target.
Southwest's budget-travel cousin, Spirit, also delivered a relatively strong quarter. Revenue of $461 million came in $2 million ahead of forecasts, and the airline reported an adjusted net loss of $243 million, or $2.48 a share, beating estimates for a loss of $2.66.
Spirit's guidance looked quite healthy. The airline said its second-quarter capacity would be down just 5.5% from the second quarter of 2019. The company said it expected operating margins to range from a loss of 5% to break-even in the quarter, based on adjusted adjusted earnings before interest, taxes, depreciation, and amortization (Ebitda).
Spirit sees revenues picking up from booking-related fees, some of which it suspended early on in the pandemic. While average fare revenue took a 24% hit in the quarter, non-ticket revenue improved to an average $55 per passenger flight segment in March.
As for Alaska Air (ALK), it also beat revenue and earnings forecasts: The company reported revenue of $797 million and an adjusted loss of $436 million, or $3.51 a share, coming in slightly ahead of consensus forecasts.
Alaska is benefiting from the return of the Boeing MAX to service, and said it planned to order 68 more planes through 2024. It should also start to see revenue gains from its entry into the Oneworld alliance (with 13 other carriers), expanding its flight network to global destinations.
Alaska issued a stronger forecast for the second quarter, expecting revenue to be down 32% to 37% from the second quarter of 2019, beating consensus estimates for a decline of 41%.
Raymond James analyst Savanthi Syth liked those results, noting that Alaska's revenue forecast beat her estimates, though its outlook for operating expenses was slightly worse. She maintained a Strong Buy on the stock with an $85 target.
American, for its part, continued to rack up some of the steepest losses in the industry. Excluding bailout funding and tax credits worth about $2 billion, the airline posted a pretax loss of $3.5 billion, or $4.32 a share, on revenue of $4 billion, which was flat from the fourth quarter of 2020. The results missed consensus forecasts, coming in $381 million worse on the pretax loss.
The carrier did strike an upbeat tone, however. "With the momentum under way from the first quarter, we see signs of continued recovery in demand, " CEO Doug Parker said in the earnings release. On a call with analysts, he noted that the airline produced the highest unit revenue of any carrier, with the most available seats for sale, operating 340,000 flights in the quarter.
American is also on its way to getting back to pre-pandemic flight capacity. The company expects to fly 80% of its 2019 seat capacity in the second quarter, rising to 90% this summer. Almost all of that will be domestic travel, with Latin America routes at just 12% of total capacity, and Atlantic and Pacific routes at just 40% of pre-pandemic levels.
American's financial health is improving: Cash and available liquidity is expected to jump to $19.5 billion in the second quarter from $17.3 billion in the first quarter, the company said. American has taken out $1.3 billion in costs from its operating structure. In March, it turned cash positive, excluding debt and severance payments.
All that said, American's debt load is enormous and its balance sheet remains stressed. The carrier issued $6.5 billion in bonds in the quarter, taking its total long-term debt and leasing liabilities to $37 billion. American has also heavily diluted its shares outstanding by issuing equity and warrants to the government. Its outstanding equity totaled 634,609 shares in the quarter, up from 425,713, a year earlier.
The stock is still tough for analysts to recommend, given the share count dilution and huge debt burden. Citigroup analyst Stephen Trent maintained his Sell rating, for instance, while Syth kept the stock at Underperform.
Cowen's Helane Becker reiterated a Market Perform on American. Atlantic and Pacific traffic isn't likely to improve until borders reopen, she noted.
The airline's balance sheet repair may now be the key to the stock moving higher.
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