Markets
LUV

Airline Stock Roundup: Buffett Pumps Up Investment, Trump Meets Carriers, Alaska Air Q4 Earnings

The past week saw Warren Buffett, founder and CEO of Berkshire Hathaway, continuing to root for airline stocks. Buffett is one of the most revered investors of all times and his interest in the sector after having shunned it for a long period of time undoubtedly bodes well for these companies.

Buffett increased his stakes in airline heavyweights like American Airlines Group AAL , Delta Air Lines DAL and United Continental Holdings UAL - in the fourth quarter of 2016, according to a regulatory filing by the Omaha, NE-based Berkshire Hathaway. Buffett had initially shown interest in the sector in the third quarter, after staying away from it for a long time.

The past week also saw top executives from leading carriers like Delta, Southwest Airlines LUV and United Continental Holdings meeting President Donald Trump. The interaction boosted airline stocks.

Alaska Air Group ALK performed well in the fourth quarter of 2016 with better-than-expected earnings and revenues. Furthermore, carriers like American Airlines and JetBlue Airways Corp. JBLU came out with their respective January traffic numbers in the past week.

Transportation - Airline Industry 5YR % Return

Transportation - Airline Industry 5YR % Return

(Read the last Airline Stock Roundup for Feb 08, 2017 ).

Recap of the Past Week's Most Important Stories

1. Warren Buffett's Berkshire Hathaway Inc. bought an astounding 43.2 million shares of Southwest Airlines in the fourth quarter. Berkshire's share in the low-cost carrier is valued at $2.2 billion. The stakes in American Airlines, Delta and United Continental have also been boosted (Read more: Buffett and Berkshire Invest Heavily in Southwest Airlines ).

2. Alaska Air Group's fourth-quarter earnings of $1.56 per share were 15 cents above the Zacks Consensus Estimate. Moreover, the bottom line expanded 6.85% on a year-over-year basis. Revenues of $1.52 billion beat the Zacks Consensus Estimate of $1.43 billion. The top line grew 11% on a year-over-year basis. Passenger revenues, which improved 9% year over year, accounted for bulk of the top line (Read more: Alaska Air Group Gains on Q4 Earnings, Revenue Beat ).

Alaska Air Group sports a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

3 JetBlue Airways posted a significant rise in air traffic for the month of Jan 2017. Traffic - measured in revenue passenger miles (RPMs) - came in at 3.86 billion, up 8.6% year over year. Operating revenue per available seat mile (RASM: a key measure of unit revenues) decreased approximately 8.5% on a year-over-year basis (Read more: JetBlue Airways' January Traffic and Load Factor Increase ).

In a separate development, JetBlue Airways reportedly trimmed its capacity in Cuba barely a few months after starting to operate scheduled service to the nation.

4. American Airlines Group posted a decline in traffic in the month of January. Traffic - measured in revenue passenger miles (RPMs) - was 17 billion, down 0.3% from the year-ago figure. The metric was hurt mainly due to disappointing performance on the domestic front. On a separate note, American Airlines' CEO, Doug Parker, was reportedly criticized by pilots for not attending the meeting of top airline executives with President Trump. The interaction lifted airline stocks as President Trump promised to upgrade the obsolete US air traffic control system (Read more: American Airlines Group January Load Factor Declines ).

5. At United Continental Holdings, load factor (percentage of seats filled with passengers) declined 50 basis points to 80.4% as traffic growth (4%) was outpaced by capacity expansion (4.7%). The Chicago-based carrier maintained the first-quarter guidance for passenger unit revenue that was issued alongside its fourth-quarter results last month.

Technical glitches have been a cause of concern for carriers. United Continental Holdings was the latest victim of disruption in operations due to technological failure.

Performance

The following table shows the price movement of the major airline players over the past week and during the last 6 months.

Company Past Week Last 6 months
HA 2% 14.22%
UAL 5% 53.6%
GOL 20.84% 20.22%
DAL 5.1% 35.1%
JBLU 5.38% 15.31%
AAL 5.42% 29.83%
SAVE -0.98% 31.81%
LUV 7.1% 49.9%
CPA 4.61% 20.11%
ALK 2.56% 45.64%

The table above shows that all airline stocks, barring Spirit Airlines, traded in the green last week due to back of the positive developments in the space. As a result, the NYSE ARCA Airline Index climbed 3.43% to $110.7 in the past week. Over the course of six months, the NYSE ARCA Airline Index appreciated 24.33%. Shares of United Continental Holdings appreciated the most (53.6%) during the period.

What's Next in the Airline Space?

GOL Linhas GOL is scheduled to report its fourth quarter 2016 results on Feb 17.

The Best Place to Start Your Stock Search

To help you find the most promising stocks in this industry, you are invited to download the full list of 220 Zacks Rank #1 "Strong Buy" stocks - absolutely free of charge. Since 1988, Zacks Rank #1 stocks have nearly tripled the market, with average gains of +26% per year. Plus, you can access the list of portfolio-killing Zacks Rank #5 "Strong Sells" and other private research. See these stocks free >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Southwest Airlines Company (LUV): Free Stock Analysis Report

JetBlue Airways Corporation (JBLU): Free Stock Analysis Report

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

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

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

United Continental Holdings, Inc. (UAL): Free Stock Analysis Report

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

To read this article on Zacks.com click here.

Zacks Investment Research

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


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

In This Story

LUV GOL JBLU ALK DAL

Other Topics

Earnings Stocks

Latest Markets Videos

    Zacks

    Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at www.zacks.com.

    Learn More