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Airline Stock Roundup: Earnings Beats from Alaska Air, United Continental, Southwest, Spirit Airlines Lift Stocks despite Ebola Fears

It was a busy time for the airline industry with quite a few major companies reporting third-quarter earnings in the last five trading days. Key players like Southwest Airline Co. (LUV), United Continental Holdings Inc. (UAL) and Alaska Air Group, Inc. (ALK) came out with impressive earnings, which beat the Zacks Consensus Estimate. Lower fuel costs primarily drove these impressive results.

The earnings performance helped the stocks gain despite fears about the Ebola virus spreading further with NYC reporting its first case related to the dreaded disease last week. The upward price movement of most airline stocks was a welcome relief from the battering of Ebola related concerns (read our previous write up here).

Recap of Most Important Stories of the Last 5 Trading Days

1. Alaska Air Group reported impressive third-quarter 2014 financial numbers. The company posted earnings of $1.47 per share, surpassing the Zacks Consensus Estimate of $1.41. On the other hand, revenues declined 5.9% year over year to $1,465 million and missed the Zacks Consensus Estimate of $1,470 million. On a year-over-year basis, passenger revenue increased 7% (read more: Alaska Air Group Beats on Q3 Earnings, Misses on Revenues).

2. Domestic operator Southwest Airlines also performed impressively in the third quarter of 2014 reporting higher-than-expected revenues as well as earnings. Management is highly bullish on the demand environment in the coming months and expects passenger revenue per available seat mile (:PRASM) to increase in October by approximately 2%, on a year-over-year basis. The company also stated in its conference call that advance bookings for November and December are also healthy (read more: Southwest Airlines Q3 Earnings, Revenues Top Estimates).

3. In the same vein, United Continental Holdings’ earnings beat the Zacks Consensus Estimate on the back of lower fuel costs. The company posted adjusted earnings of $2.75 per share, ahead of the Zacks Consensus Estimate of $2.70. Quarterly revenues improved 3.3% year over year to $10,563 million, but lagged the Zacks Consensus Estimate of $10,623 million (read more: United Continental Beats Q3 Earnings, Misses Revenues).

United Continental was also in the news for its decision to launch four new Pacific routes to further enhance its presence in the region. While nonstop services between Los Angeles and Melbourne and between San Francisco and Haneda airport at Tokyo were launched on Monday, flights from its Guam hub to Seoul and to Shanghai were flagged off on Oct 27 and Oct 28, respectively.

4. New York-based passenger carrier JetBlue Airways Corp. (JBLU), however, reported lower-than-expected revenues and earnings in the third quarter of 2014. Results were hurt by increased operating expenses due to higher salaries and wages (up 12.3%) and other operating expenses (up 9.5%). JetBlue’s operating unit cost or cost per available seat mile (CASM) rose 1.2% year over year while excluding fuel and profit sharing, CASM increased 2.6% from the year-ago quarter (read more: JetBlue Q3 Earnings & Revenues Miss Estimates, Up Y/Y).

JetBlue also launched its version of premium service, Mint, between John F. Kennedy Airport, NYC and San Francisco International Airport in the past week.

5. Another major player that delivered robust earnings in the third quarter was Spirit Airlines Inc. (SAVE). The company reported adjusted earnings of $1.01 per share surpassing the Zacks Consensus Estimate of 96 cents. The airline also reported higher-than-expected revenues. The top line was boosted by higher operating yields and growth in flight volume. The upbeat results impacted the stock positively.

Performance

The following table shows the price movements of the major airline players over the past 5 trading days and during the last 6 months:

Company

Last 5 days

Last 6 months

AAL

6.31%

14.74%

ALK

11.40%

13.70%

CPA

9.13%

-16.09%

DAL

6.30%

11.62%

GOL

8.80%

-19.36%

HA

13.80%

19.10%

JBLU

-11.50%

49.14%

LUV

-0.17%

45.45%

SAVE

12.40%

21.61%

UAL

5.75%

33.57%

Over the past five trading sessions, Hawaiian Holdings Inc. (HA) was the biggest gainer among the major players in the airline industry with its share price increasing 13.80%. Meanwhile, JetBlue Airways has witnessed the highest upside (49.14%) over the last six months.

What’s Next in the Airline Biz?

While nothing specific is lined up later this week, it would be interesting to see whether the key airline stocks are able to continue their positive momentum or once again, give in to the Ebola scare.

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