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Airline Stock Roundup: Q3 Earnings Beat at AAL, LUV & Others Amid Fuel Cost Woes


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In the past week, several airline companies like American Airlines Group Inc. AAL , Southwest Airlines Co. LUV , Spirit Airlines, Inc. SAVE , Alaska Air Group, Inc. ALK and SkyWest, Inc. SKYW released their respective third-quarter 2018 financial numbers.

Even though all the abovementioned carriers reported better-than-expected earnings per share, high fuel costs limited bottom-line growth. At American Airlines and Alaska Air Group quarterly earnings declined year over year due to rise in fuel costs.

While investors reacted positively to the earnings reports of the likes of American Airlines and Spirit Airlines, the Southwest Airlines stock declined following the earnings release despite the outperformance. With fuel costs already denting profitability, Southwest Airlines' commentary on the conference call that it expects unit costs (excluding fuel and profit sharing) to increase at least 3% in 2019 disappointed investors and sent the stock tumbling.

(Read the last  Airline Stock Roundup for Oct 24, 2018 )

Recap of the Past Week's Most Important Stories

1. Spirit Airlines' third-quarter 2018 earnings per share (excluding 5 cents from non-recurring items) came in at $1.47, surpassing the Zacks Consensus Estimate of $1.39. Moreover, the bottom line soared 56.4% year over year.

The carrier recorded revenues of $904.3 million, marginally beating the Zacks Consensus Estimate of $904.1 million.  Also, the top line improved 31.6% year over year owing to 24.6% and 3% rise in passenger segments and operating yields, respectively. (Read more: Spirit Airlines Up on Q3 Earnings & Revenue Beat ).

Spirit Airlines carries a Zacks Rank #2 (Buy). You can see  the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

2. American Airlines' third-quarter 2018 earnings (excluding 39 cents from non-recurring items) of $1.13 per share exceeded the Zacks Consensus Estimate of $1.12. Revenues totaled $11,559 million, which outpaced the Zacks Consensus Estimate of $11,551.6 million. The top line also improved on a year-over-year basis. Strong demand for air travel led to this year-over-year improvement in the top line. For 2018, the carrier still expects adjusted earnings per share between $4.50 and $5.  (Read more: American Airlines Q3 Earnings Top, Dip Y/Y on Cost Woes ).

3. Southwest Airlines' third-quarter 2018 earnings of $1.08 per share came well ahead of the Zacks Consensus Estimate by 2 cents. Despite higher fuel prices, the bottom line improved 22.7% on a year-over-year basis. Results were aided by stronger revenues.

Operating revenues of $5,575 million outpaced the Zacks Consensus Estimate of $5,557 million. The top line also rose year over year. Passenger revenues, accounting for bulk (93.2%) of the top line, increased 5.1% year over year. Economic fuel costs, which increased 8.7% to $2.25 per gallon in the third quarter, are estimated to be between $2.30 and $2.35 per gallon in the final quarter of 2018. (Read more: Southwest Q3 Earnings Top Estimates on Higher Revenues ).

4. Alaska Air Group reported third-quarter 2018 earnings per share (excluding 16 cents from non-recurring items) of $1.91, which exceeded the Zacks Consensus Estimate of $1.80.

Revenues came in at $2,212 million surpassing the Zacks Consensus Estimate of $2,203.9 million. Moreover, the top line increased 5% on a year-over-year basis. Passenger revenues, accounting for a bulk of the top line (92.4%), were up 4% year over year. (Read more: Alaska Air Group Q3 Earnings Top Estimates, Fall Y/Y ).

5. SkyWest's third-quarter 2018 earnings per share of $1.57 exceeded the Zacks Consensus Estimate by 16 cents and increased 55.5% on a year-over-year basis. A lower effective tax rate drove the company's bottom-line growth. Due to the new tax law (Tax Cuts and Jobs Act), effective tax rate in the reported quarter was 24.5% compared with 38% a year ago. Quarterly revenues came in at $829.3 million, beating the Zacks Consensus Estimate of $826.4 million. The top line benefited from the company's improved fleet mix. Tax rate is expected to be approximately 25% in the final quarter of 2018.

Price Performance

The following table shows the price movement of the major airline players over the past five trading days and during the last six months.

The table above shows all airline stocks, barring Southwest Airlines, traded in the green over the last week leading to the NYSE ARCA Airline Index increasing 3.3%. Over the course of six months, the sector tracker gained 0.9%.

What's Next in the Airline Space?

Investors will look forward to October traffic reports from the likes of Delta Air Lines, Inc. DAL in the coming days. GOL Linhas AĆ©reas Inteligentes S.A.'s GOL third-quarter earnings report on Nov 1 is also likely to grab attention.

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Delta Air Lines, Inc. (DAL): Free Stock Analysis Report

Alaska Air Group, Inc. (ALK): Free Stock Analysis Report

Spirit Airlines, Inc. (SAVE): Free Stock Analysis Report

Gol Linhas Aereas Inteligentes S.A. (GOL): Free Stock Analysis Report

American Airlines Group Inc. (AAL): Free Stock Analysis Report

Southwest Airlines Co. (LUV): Free Stock Analysis Report

SkyWest, Inc. (SKYW): Free Stock Analysis Report

To read this article on Zacks.com click here.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



This article appears in: Investing , Business , Earnings , Stocks
Referenced Symbols: DAL , ALK , SAVE , GOL , AAL



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