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3 Airline Stocks Up 10% Year to Date With More Upside Potential
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Solid recovery of air travel demand, both domestic and international, has been aiding the Zacks Airline industry, post the easing of COVID-19 travel restrictions and the reopening of the global economy. People are again booking flights, thereby leading to higher passenger revenues, which contribute to the bulk of most airlines’ top line.
Notably, the Zacks Airline industry has risen 26.4% so far this year, outperforming the 6.7% growth of the broader Zacks Transportation sector and 15.3% rise of the Zacks S&P 500 composite.
Image Source: Zacks Investment Research
The buoyancy in the industry is further confirmed by its Zacks Industry Rank #42, which places it in the top 17% of more than 250 Zacks industries.
Per Airlines for America, U.S. airlines are anticipated to carry 257 million passengers from Jun 1 to Aug 31, 2023. The projection marks an all-time high.
Owing to the uptick in passenger volumes coupled with the decline in fuel costs the International Air Transport Association or IATA doubled its current-year forecast for net profits. Passenger revenues are the biggest driver of the rosy projection for 2023. Per IATA, passenger revenues in 2023 are now anticipated to be $546 billion compared with the previous estimate of $522 billion. The revised revenue forecast indicates a 27% increase from the 2022 actuals.
Latest Events in the Industry Indicate Positivity
The positivity surrounding the industry is further evident from the impressive traffic numbers reported for the month of May by airline companies like Copa Holdings, S.A. (CPA - Free Report) and Gol Linhas Aereas Inteligentes .
On a shareholder-friendly move, Delta Air Lines (DAL - Free Report) recently announced the resumption of its dividend payout. The renewed dividend of 10 cents per share, will be paid on Aug 7, 2023, to all shareholders of record as of Jul 17, 2023. This resumption is indicative of Delta's progress on its three-year financial plan (which includes debt repayment of more than $10 billion in the last two years).
3 Airline Stocks to Pick Now
Given this encouraging backdrop, we present three airline stocks, Copa Holdings, Allegiant Travel Company (ALGT - Free Report) and Alaska Air Group, Inc. (ALK - Free Report) , which are anticipated to flourish in the latter half of the year as well.
We believe that the current summer season is likely to see a further surge in passenger revenues, in turn, aiding airlines’ top lines.
These stocks have a Zacks Rank #1 (Strong Buy) or #2 (Buy), a VGM Score of A or B and a solid expected earnings growth rate for the current year. These have also witnessed upward estimate revisions in the past 90 days. Additionally, these stocks have a strong trailing four-quarter average earnings surprise history. You can see the complete list of today’s Zacks #1 Rank stocks here.
Our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 or 2, offer the best investment opportunities for investors. The selected companies seem compelling investment propositions at the moment.
Also, all the abovementioned stocks have gained more than 10% with respect to price in the year-to-date period.
Image Source: Zacks Investment Research
Each of them has a market capitalization of more than $1 billion.
Copa Holdings: This Panama City-based company provides airline passenger and cargo services.
Copa Holdings’ top line has been benefiting from the recovery in air travel demand. Operating revenues for the March quarter increased 29% to $867.3 million on the back of passenger revenues. Passenger revenues (contributing 96.2% to the top line) increased 28.5% from first-quarter 2019 levels, owing to higher yields (up 20%).
CPA's focus on its cargo segment is encouraging. In first-quarter 2023, cargo and mail revenues surged 51.8% to $23.25 million, owing to higher cargo volumes and yields. The company’s fleet modernization and cost-management efforts are commendable.
CPA reported highly-impressive traffic numbers for May 2023 on the back of upbeat air-travel demand. Driven by high passenger volumes, Copa Holdings’ revenue passenger miles (a measure of traffic) rose 15.8% in May on a year-over-year basis. To match the demand swell, CPA is increasing capacity. In May, available seat miles (a measure of capacity) increased 15.3% year over year. With traffic growth outpacing capacity expansion, the load factor (percentage of seats filled by passengers) improved to 86.1% from 85.7% in May 2022.
Copa Holdings flaunts a Zacks Rank #1 and has a VGM Score of A. The Zacks Consensus Estimate for CPA’s 2023 EPS has moved up 33.4% in the past 90 days. Its expected earnings growth rate for 2023 is 84.14%. CPA has a trailing four-quarter earnings surprise of 14.60%, on average.
CPA has a market capitalization of $4.30 billion.
Allegiant: This Las Vegas, NV-based leisure travel company provides travel services and products to residents of underserved cities in the United States.
Allegiant is seeing a steady recovery in leisure air travel demand. In first-quarter 2023, operating revenues grew 29.9% on a year-over-year basis. Passenger revenues, contributing 93.7% to the top line, increased around 31.3% on a year-over-year basis. Allegiant's fleet modernization efforts are encouraging. ALGT exited 2022 with 121 planes in its fleet. Fleet size at the end of 2023 is expected to be 127.
Allegiant carries a Zacks Rank #1 and has a VGM Score of A. The Zacks Consensus Estimate for ALGT’s 2023 EPS has moved up 46.9% in the past 90 days. Its expected earnings growth rate for 2023 is more than 100%. ALGT has a trailing four-quarter earnings surprise of 79.78%, on average.
ALGT has a market capitalization of $2.29 billion.
Alaska Air: This Seattle, WA-based airline company currently carries a Zacks Rank #1 and has a VGM Score of B. The Zacks Consensus Estimate for ALK 2023 EPS has moved up 9.6% in the past 90 days. Its expected earnings growth rate for 2023 is 44.4%.
On the back of upbeat air-travel demand and favorable pricing, Alaska Air's top line increased 31% year over year in the March quarter. ALK expects second-quarter 2023 total revenues to increase 2.5-5.5% from the second-quarter 2022 actuals. To match the upbeat demand, capacity in the June quarter is expected to expand in the 6-9% range.
Alaska Air’s fleet-modernization initiatives are also encouraging. ALK expects to boost its fleet as well as workforce in 2023 to meet the anticipated high demand. On a shareholder-friendly note, ALK’s management resumed share buybacks this year. In first-quarter 2023, ALK purchased 413,554 shares for $18 million. The company expects share repurchases of at least $100 million in 2023.
ALK has a market capitalization of $6.33 billion.
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3 Airline Stocks Up 10% Year to Date With More Upside Potential
Solid recovery of air travel demand, both domestic and international, has been aiding the Zacks Airline industry, post the easing of COVID-19 travel restrictions and the reopening of the global economy. People are again booking flights, thereby leading to higher passenger revenues, which contribute to the bulk of most airlines’ top line.
Notably, the Zacks Airline industry has risen 26.4% so far this year, outperforming the 6.7% growth of the broader Zacks Transportation sector and 15.3% rise of the Zacks S&P 500 composite.
Image Source: Zacks Investment Research
The buoyancy in the industry is further confirmed by its Zacks Industry Rank #42, which places it in the top 17% of more than 250 Zacks industries.
IATA's Bullish Projections Confirm Airlines’ Buoyancy
Per Airlines for America, U.S. airlines are anticipated to carry 257 million passengers from Jun 1 to Aug 31, 2023. The projection marks an all-time high.
Owing to the uptick in passenger volumes coupled with the decline in fuel costs the International Air Transport Association or IATA doubled its current-year forecast for net profits. Passenger revenues are the biggest driver of the rosy projection for 2023. Per IATA, passenger revenues in 2023 are now anticipated to be $546 billion compared with the previous estimate of $522 billion. The revised revenue forecast indicates a 27% increase from the 2022 actuals.
Latest Events in the Industry Indicate Positivity
The positivity surrounding the industry is further evident from the impressive traffic numbers reported for the month of May by airline companies like Copa Holdings, S.A. (CPA - Free Report) and Gol Linhas Aereas Inteligentes .
On a shareholder-friendly move, Delta Air Lines (DAL - Free Report) recently announced the resumption of its dividend payout. The renewed dividend of 10 cents per share, will be paid on Aug 7, 2023, to all shareholders of record as of Jul 17, 2023. This resumption is indicative of Delta's progress on its three-year financial plan (which includes debt repayment of more than $10 billion in the last two years).
3 Airline Stocks to Pick Now
Given this encouraging backdrop, we present three airline stocks, Copa Holdings, Allegiant Travel Company (ALGT - Free Report) and Alaska Air Group, Inc. (ALK - Free Report) , which are anticipated to flourish in the latter half of the year as well.
We believe that the current summer season is likely to see a further surge in passenger revenues, in turn, aiding airlines’ top lines.
These stocks have a Zacks Rank #1 (Strong Buy) or #2 (Buy), a VGM Score of A or B and a solid expected earnings growth rate for the current year. These have also witnessed upward estimate revisions in the past 90 days. Additionally, these stocks have a strong trailing four-quarter average earnings surprise history. You can see the complete list of today’s Zacks #1 Rank stocks here.
Our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 or 2, offer the best investment opportunities for investors. The selected companies seem compelling investment propositions at the moment.
Also, all the abovementioned stocks have gained more than 10% with respect to price in the year-to-date period.
Image Source: Zacks Investment Research
Each of them has a market capitalization of more than $1 billion.
Copa Holdings: This Panama City-based company provides airline passenger and cargo services.
Copa Holdings’ top line has been benefiting from the recovery in air travel demand. Operating revenues for the March quarter increased 29% to $867.3 million on the back of passenger revenues. Passenger revenues (contributing 96.2% to the top line) increased 28.5% from first-quarter 2019 levels, owing to higher yields (up 20%).
CPA's focus on its cargo segment is encouraging. In first-quarter 2023, cargo and mail revenues surged 51.8% to $23.25 million, owing to higher cargo volumes and yields. The company’s fleet modernization and cost-management efforts are commendable.
CPA reported highly-impressive traffic numbers for May 2023 on the back of upbeat air-travel demand. Driven by high passenger volumes, Copa Holdings’ revenue passenger miles (a measure of traffic) rose 15.8% in May on a year-over-year basis. To match the demand swell, CPA is increasing capacity. In May, available seat miles (a measure of capacity) increased 15.3% year over year. With traffic growth outpacing capacity expansion, the load factor (percentage of seats filled by passengers) improved to 86.1% from 85.7% in May 2022.
Copa Holdings flaunts a Zacks Rank #1 and has a VGM Score of A. The Zacks Consensus Estimate for CPA’s 2023 EPS has moved up 33.4% in the past 90 days. Its expected earnings growth rate for 2023 is 84.14%. CPA has a trailing four-quarter earnings surprise of 14.60%, on average.
CPA has a market capitalization of $4.30 billion.
Allegiant: This Las Vegas, NV-based leisure travel company provides travel services and products to residents of underserved cities in the United States.
Allegiant is seeing a steady recovery in leisure air travel demand. In first-quarter 2023, operating revenues grew 29.9% on a year-over-year basis. Passenger revenues, contributing 93.7% to the top line, increased around 31.3% on a year-over-year basis. Allegiant's fleet modernization efforts are encouraging. ALGT exited 2022 with 121 planes in its fleet. Fleet size at the end of 2023 is expected to be 127.
Allegiant carries a Zacks Rank #1 and has a VGM Score of A. The Zacks Consensus Estimate for ALGT’s 2023 EPS has moved up 46.9% in the past 90 days. Its expected earnings growth rate for 2023 is more than 100%. ALGT has a trailing four-quarter earnings surprise of 79.78%, on average.
ALGT has a market capitalization of $2.29 billion.
Alaska Air: This Seattle, WA-based airline company currently carries a Zacks Rank #1 and has a VGM Score of B. The Zacks Consensus Estimate for ALK 2023 EPS has moved up 9.6% in the past 90 days. Its expected earnings growth rate for 2023 is 44.4%.
On the back of upbeat air-travel demand and favorable pricing, Alaska Air's top line increased 31% year over year in the March quarter. ALK expects second-quarter 2023 total revenues to increase 2.5-5.5% from the second-quarter 2022 actuals. To match the upbeat demand, capacity in the June quarter is expected to expand in the 6-9% range.
Alaska Air’s fleet-modernization initiatives are also encouraging. ALK expects to boost its fleet as well as workforce in 2023 to meet the anticipated high demand. On a shareholder-friendly note, ALK’s management resumed share buybacks this year. In first-quarter 2023, ALK purchased 413,554 shares for $18 million. The company expects share repurchases of at least $100 million in 2023.
ALK has a market capitalization of $6.33 billion.