Scalper1 News
The airline stocks, which were flying low at the start of the year on a stronger dollar and global growth worries, skyrocketed lately on improving industry fundamentals. Higher margin, lower debt, surging ancillary revenues from hotel accommodation, car rentals, onboard food, limited capacity growth and a host of modifications in operations helped the sector to gain altitude. As a result, the pure-play aviation ETF U.S. Global Jets ETF (NYSEARCA: JETS ), which has added just 4.5% so far this year, advanced about 5.8% in the last one month (as of October 22, 2015). In any case, cheap fuel has been a bonus for long. The swelling middle-income population in emerging markets is benefitting worldwide customer growth. Now, solid earnings results from top-notch companies are an icing on the cake. The sector is in the top 16% category of the Zacks Industry Rank at the time of writing, giving strong indications of the upcoming flight of the entire industry. Let’s take a look at some of the key third-quarter 2015 earnings in the sector: On October 14, Delta Air Lines (NYSE: DAL ) beat on earnings but missed on revenues. The top line was hurt by adverse foreign currency movements. In Q2 itself, Delta had planned to slash its international capacity by 3.5% in the fourth quarter of 2015 to lessen the unfavorable impact of foreign exchange on its international operations. Third-quarter adjusted earnings of $1.74 per share steered past the Zacks Consensus Estimate by 3 cents and improved 45% from the year-ago figure. Revenues dipped 0.6% year over year to $11.11 billion in the reported quarter, falling short of the Zacks Consensus Estimate of $11.12 billion. Delta expects volatile fuel prices going ahead. The estimated fuel price, including taxes and hedges, is expected in the range of $1.75 to $1.80 per gallon for the final quarter; the high end being in line with the average fuel price in Q3. The average price is even lower than what Delta had earlier expected for the second half of 2015 i.e.; in the band of $1.90 to $2.00 per gallon. This Zacks ETF Rank #2 (Buy) stock has a Zacks Momentum & Value style score of ‘A’ and a Growth score of ‘B’. Shares advanced about 4% in the last five trading sessions (as of October 22, 2015). United Continental Holdings Inc. (NYSE: UAL ) came up with mixed Q3 results with an earnings beat and a revenue miss. Earnings were up about 65% year over year on lower fuel costs and reduced operating expenses. Revenues declined 2.4% on lower passenger revenues. Cargo revenues were down 0.8% while other revenues improved 9.8% in the third quarter. Its indicators are also promising with a Zacks ETF Rank #2, and Growth, Value and Momentum scores of ‘A’. Shares were up about 2.8% in the key trading session of October 22, post earnings. Yet another leading U.S. carrier Southwest Airlines Co.’s (NYSE: LUV ) third-quarter 2015 earnings and revenues outpaced the respective Zacks Consensus Estimate. Revenues grew 2% year over year helped by 3.3% and 102.1% expansion in Passenger and Other revenues, respectively. Airline traffic was up 8.9% while passenger load factor inched up to 85.4% from 84.4% recorded in the year-ago quarter. LUV, with a Zacks ETF Rank #2, also boasts hopeful indicators of Growth score of ‘B’ and Value and Momentum score of ‘A’. Shares shot up over 7.4% to reflect the results on October 22. On October 23, American Airlines Group (NASDAQ: AAL ) reached a milestone when it came up with the ‘ highest quarterly profit in the company’s history’. This airline reported $2.77 per share of Q3 earnings breezing past the estimate of $2.72. Revenues came in at $10.71 billion, marginally short of the Zacks Consensus Estimate of $10.72 billion. This is also a Zacks ETF Rank #2 stock and its investing metrics were even more upbeat with all Growth, Value and Momentum criteria having a top-notch score of ‘A’. The company also bought back $1.56 billion of common stock. Not only these heavy-weight stocks, sturdy performances also were put up by other sector players. Alaska Air Group, Inc.’s (NYSE: ALK ) Q3 2015 earnings per share of $2.16 beat the Zacks Consensus Estimate of $2.06 and improved 47% from the year-ago earnings. Revenues grew 3% year over year and narrowly beat our estimate. This Zacks ETF Rank #2 stock can be a great pick for growth and value investors. ALK added 1.7% following earnings on October 22. By now, one must have realized that the mood in the airlines industry is upbeat. So investors might play the trend via basket approach to tap the entire potential of the space. And to do so, what could be a better option other than JETS ETF? The $46 million-fund holds over 30 stocks in its portfolio and is concentrated on a few individual securities, as it allocates about 70% to the top 10 holdings. Southwest Airlines (12.94%), American Airlines (12.78%), Delta Airlines (12.34%), United Continental (11.31%) are the top four elements in the basket, with a combined share of about 45%. Alaska Air holds a seventh position in the fund with 3.51% weight. The product charges 60 bps in fees. The fund added 3.5% in the last five trading sessions (as of October 22, 2015) which made the peak of airlines earnings releases. Original Post Scalper1 News
Scalper1 News