Don't look now but everyone's favorite sector to hate, the
airlines, is holding steady near the top of the Zacks Industry Rank
list. At time of writing, the sector
was ranked fifth
out of all 257 Zacks Industries with the 23 components in the space
possessing an average Zacks Rank of 2.22.
Clearly the depressed oil prices are more than cancelling out
the sluggish economic environment for many analysts, as positive
revisions are outnumbering negative ones by a roughly 2.5 to 1
margin. In fact,
of the 23 stocks
, four have a Zacks Rank of 1 or 'Strong Buy' (11 have a Zacks Rank
of 2) while only one has a Zacks Rank of 4 or higher, translating
into a 'Sell' (
Thanks to this trend, some investors may want to consider making
a play on the airline sector due in large part to these favorable
analyst views. However, many investors still despise airlines as
investments thanks to intense competitive pressures, the impact of
volatile oil on airlines' bottom lines, and the rash of
bankruptcies that always seems to impact firms in this corner of
the market (Read
Airline ETF In Focus As AMR Lands in Bankruptcy
This bearishness certainly isn't without merit, especially when
looking at the sector compared to the S&P 500 over the long
term. In the past year, the S&P 500 has outperformed
Southwest Airlines (
by about 1,600 basis points in the time period while it has beaten
out the broad
Guggenheim Airline ETF (
by about 1,100 basis points as well.
Yet, this has reversed in recent months, as LUV has
significantly outperformed the S&P 500 in the past 90 days
while FAA has seen a return in line with America's main benchmark.
With thiese kinds of results, airlines could finally be beginning
to turn around-at least in the short term-suggesting that if the
Zacks Ranks hold up for the segment, it could be time to buy the
much-maligned sector (read
Is it Time to Buy the Airline ETF?
What do you think? Is now the time to buy airline stocks or is
the sector destined to underperform?
Let us know what you think in the comments below!
Author is long LUV.
BRISTOW GROUP (BRS): Free Stock Analysis Report
GUGG-AIRLINE (FAA): ETF Research Reports
SOUTHWEST AIR (LUV): Free Stock Analysis Report
To read this article on Zacks.com click here.