For Immediate Release
Chicago, IL - April 19, 2012 - 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
Berkshire Hathaway Inc.
(
BRK.B
),
Southwest Airlines Co.
(
LUV
),
United Continental Holdings Inc.
(
UAL
),
Delta Air Lines
Inc.
(
DAL
) and
JetBlue Airways Corporation
(
JBLU
).
Get the most recent insight from Zacks Equity Research with the
free Profit from the Pros newsletter:
http://at.zacks.com/?id=5513
Here are highlights from Wednesday's Analyst
Blog:
Buffett May Unveil Heir Soon
Warren Buffett, the Chairman and CEO of
Berkshire Hathaway Inc.
(
BRK.B
), has had no intention till now to step down from his post, but
now it seems that the octogenarian will soon have to do some
rethinking in this regard as there has been an unprecedented
development in Buffett's health. On Tuesday, he announced that he
has been diagnosed with Stage 1 prostate cancer.
Despite an early diagnosis, the side effects of the impending
treatment of the 81-year-old could be a concern. Warren Buffett has
decided to undergo radiation treatment. Given his age, the
radiation treatment may have a negative effect on his
health.
Nevertheless, Buffett sounded optimistic in his letter to
shareholders saying that he was feeling normal and his energy level
continued to be 100%.
This sudden announcement has once again raised a question about
Berkshire's succession plans in the minds of its shareholders.
Buffett had already announced during the last shareholder's meet
that the prospective candidates have been finalized for the higher
ranks. However, the names have been kept under wraps.
The shareholders will continue to feel anxious until they get to
know the names or get more clarity on the company's succession
plans. Buffett plans to split up his single job into three parts
that of a CEO, Chairman and investment management for the smooth
functioning of the organization. We also believe that it is
extremely difficult for any new management or individual of this
behemoth conglomerate to ably fill in his shoes.
As far as the operations of Berkshire Hathaway is considered,
sans Buffett, we believe the conglomerate will continue to run
swiftly, with most of its businesses performing exceptionally well.
Though some of its businesses have been affected in the recent
years due to the U.S. downturn, they are slowly recovering with the
gradual recovery of the economy.
Moreover, Buffett's practice of letting the units' managers
handle their own operations independently, without his significant
interference, is expected to keep the wheels of the business
running smoothly even if he is not around.
Though Buffett has streamlined operations to run on their own,
greater concerns surround the investment role played by Buffett
along with the company's Vice-Chairman Charlie Munger, who is
already 88 years old. Buffett is known as a value-investor
worldwide. While he has picked up hedge fund manager Todd Combs and
Ted Weschler to manage the company's investments, utilizing the
vast amount of cash that the company generates quarter after
quarter is a mammoth task.
Though Berkshire has to run without Buffett someday, the two are
so closely interlinked that any news relating to Buffett's
retirement from the job is bound to make headlines and spark
investors' concerns.
Look to the Air Ahead of Earnings
The lingering economic uncertainty and inflating fuel costs
might have dampened several sectors, but these challenges have
failed to unnerve the U.S. air carriers. Despite the headwinds, the
U.S. air carriers are providing excellent services to their
passengers. They are performing at their record levels when it
comes to on-time performance, baggage handling, fewer customer
complaints, lower cancellations and overbooked flights.
Airlines appear to be well placed against the backdrop of higher
fares, new advertising rules and capacity cuts.
The Efficient Steps
Fuel prices, though high, remain well below the 2008 level of
over $140 per barrel that had ravaged the airlines industry. The
carriers are taking profitable actions to endure the current
crisis. They are successfully passing on the increased cost to
customers in the form of fare hikes and effectively using
fuel-hedging strategies to combat the rising fuel prices.
Apart from cutting capacities, air carriers are adding novel
features to their services, as well as introducing new products.
These measures will fuel revenue growth and reduce non-fuel costs,
thereby driving future profitability.
The Costs Before Flying
Nevertheless, the addition of new services and products involve
a huge amount of spending, which might restrict the carriers'
profitability in the near term.
Moreover, the carriers are focusing on fleet rightsizing. Though
initially expensive, this seems to be the correct strategy to lower
non-fuel costs. Air carriers are replacing their older fleet, which
are no longer practical in a fuel-expensive environment, with the
latest fuel-efficient aircraft.
Unfortunately, the increased expenses will take a toll for now
and the airlines are expected to report loss in the first
quarter.
Southwest Airlines Co.
(
LUV
), the largest U.S. low-cost carrier, will kick-start the earnings
reports in the sector when it comes out with its results on April
19. (Read our full coverage on the earnings preview report:
Earnings Preview: Southwest Airlines
)
The largest U.S. airline
United Continental Holdings Inc.
(
UAL
) and the second-largest U.S. airline
Delta Air Lines
Inc.
(
DAL
) is slated to release its earnings on April 26 and April 25,
respectively. One of the leading low-cost airlines
JetBlue Airways Corporation
(
JBLU
) will report first quarter earnings on April 26.
Cashing In on the Opportunity
We believe any fall in the share prices of these major carriers,
ahead of the expected earnings results, points to the good entry
level validating attractive valuations. Increasing demand for
global air travel and a concomitant rise in fares justify our
optimistic thesis on the airline companies.
We are currently maintaining our long-term Neutral
recommendation on Delta and JetBlue, and Underperform rating on
United Continental and Southwest. For the short term (1-3 months),
Southwest and JetBlue retain the Zacks #3 Rank (Hold) while Delta
and United Continental holds Zacks #4 Rank (Sell) and #5 Rank
(Strong Sell), respectively.
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BERKSHIRE HTH-B (BRK.B): Free Stock Analysis
Report
DELTA AIR LINES (
DAL
): Free Stock Analysis Report
JETBLUE AIRWAYS (
JBLU
): Free Stock Analysis Report
SOUTHWEST AIR (
LUV
): Free Stock Analysis Report
UNITED CONT HLD (
UAL
): Free Stock Analysis Report
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