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Airline Stock Roundup: UAL & ALK Beat on Q2 Earnings, SAVE Tweaks View
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In the past week, airline heavyweights United Airlines (UAL - Free Report) and Alaska Air Group (ALK - Free Report) reported second-quarter 2024 results. Both companies posted better-than-expected earnings per share (EPS). However, both carriers offered below-par guidance for the third quarter of 2024 due to ticket price cuts to attract domestic travelers.
Spirit Airlines (SAVE - Free Report) expects the adjusted loss and revenues for the second quarter to be worse than that expected previously due to lackluster non-ticket income. Delta Air Lines (DAL - Free Report) was also featured in the news, courtesy of a rating upgrade secured from Fitch Ratings. On Jul 11, Delta kick-started the second-quarter earnings season for airlines. DAL’s earnings report was discussed in detail in the previous week’s write-up.
Recap of the Latest Top Stories
1 United Airlines reported second-quarter 2024 EPS (excluding 18 cents from non-recurring items) of $4.14, which surpassed the Zacks Consensus Estimate of $3.97. Earnings decreased 17.7% on a year-over-year basis. Operating revenues of $14.98 billion missed the Zacks Consensus Estimate of $15.13 billion. The top line increased 5.7% year over year due to upbeat air travel demand. Management expects third-quarter 2024 earnings of $2.75-$3.25 per share. The mid-point of the guided range is below the Zacks Consensus Estimate of $3.61. Like DAL last week, UAL’s management stated that the practice of price cuts by low-cost carriers, as they struggle to fill the excess seats this summer, is hurting even bigger rivals like UAL. Discount carriers have added too many seats that they are now attempting to fill by lowering fares and compelling airline majors to do the same in a bid to stay competitive. For 2024, adjusted EPS are expected between $9 and $11. The mid-point of the guided range is above the Zacks Consensus Estimate of $9.75.
2. Alaska Air reported second-quarter 2024 EPS(excluding 84 cents from non-recurring items) of $2.55, which surpassed the Zacks Consensus Estimate of $2.36. Earnings decreased 15% on a year-over-year basis. Operating revenues of $2.89 billion lagged the Zacks Consensus Estimate of $2.95 billion. The top line increased 2% year over year due to higher passenger revenues. ALK anticipates third-quarter 2024 EPSbetween $1.40 and $1.60. The mid-point of the guided range is below the Zacks Consensus Estimate of $2.19. For 2024, adjusted EPS are expected between $3.50 and $4.50. The mid-point of the guided range is below the Zacks Consensus Estimate of $4.55.
3. Spirit Airlines expects revenues of $1.28 billion for second-quarter 2024. The new guidance is below the mid-point of the previously mentioned $1.32-$1.34 billion. The adjusted operating margin is expected between (13.5%) and (12.5%) compared with the earlier mentioned (9%)-(11%). The adjusted operating loss is expected to be $160-$173 million compared with the previously mentioned $121-$145 million.
4 Fitch Ratings upgraded Delta’s credit rating to investment grade, owing to the airline company’s financial performance and upbeat demand for air travel, apart from the airline’s debt-reduction efforts. Delta was upgraded to “BBB-”, which is an investment-grade rating. Fitch Ratings is one of three major agencies to evaluate and assign ratings to companies based on financial metrics.
Performance
The following table shows the price movements of the major airline players over the past week and during the last six months.
Image Source: Zacks Investment Research
The table above shows that most airline stocks have traded in the green over the past week. The NYSE ARCA Airline Index gained 1.6% to $56.5 over the past five trading days. Over the past six months, the NYSE ARCA Airline Index has declined 5%.
What's Next in the Airline Space?
Second-quarter 2024 earnings results from American Airlines (AAL - Free Report) are expected on Jul 25.
We expect the results of AAL to be aided by high passenger revenues, owing to upbeat air travel demand. With the summer season partially falling in the second quarter, buoyant air travel demand in the summer holiday period is likely to have boosted the company’s top line in the quarter under review. However, high labor costs are likely to have dented its performance. Like its peers, discounting pressure at the low end of the market may have hurt AAL’s pricing power, in turn impacting its performance.
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Airline Stock Roundup: UAL & ALK Beat on Q2 Earnings, SAVE Tweaks View
In the past week, airline heavyweights United Airlines (UAL - Free Report) and Alaska Air Group (ALK - Free Report) reported second-quarter 2024 results. Both companies posted better-than-expected earnings per share (EPS). However, both carriers offered below-par guidance for the third quarter of 2024 due to ticket price cuts to attract domestic travelers.
Spirit Airlines (SAVE - Free Report) expects the adjusted loss and revenues for the second quarter to be worse than that expected previously due to lackluster non-ticket income. Delta Air Lines (DAL - Free Report) was also featured in the news, courtesy of a rating upgrade secured from Fitch Ratings. On Jul 11, Delta kick-started the second-quarter earnings season for airlines. DAL’s earnings report was discussed in detail in the previous week’s write-up.
Recap of the Latest Top Stories
1 United Airlines reported second-quarter 2024 EPS (excluding 18 cents from non-recurring items) of $4.14, which surpassed the Zacks Consensus Estimate of $3.97. Earnings decreased 17.7% on a year-over-year basis. Operating revenues of $14.98 billion missed the Zacks Consensus Estimate of $15.13 billion. The top line increased 5.7% year over year due to upbeat air travel demand. Management expects third-quarter 2024 earnings of $2.75-$3.25 per share. The mid-point of the guided range is below the Zacks Consensus Estimate of $3.61. Like DAL last week, UAL’s management stated that the practice of price cuts by low-cost carriers, as they struggle to fill the excess seats this summer, is hurting even bigger rivals like UAL. Discount carriers have added too many seats that they are now attempting to fill by lowering fares and compelling airline majors to do the same in a bid to stay competitive. For 2024, adjusted EPS are expected between $9 and $11. The mid-point of the guided range is above the Zacks Consensus Estimate of $9.75.
2. Alaska Air reported second-quarter 2024 EPS(excluding 84 cents from non-recurring items) of $2.55, which surpassed the Zacks Consensus Estimate of $2.36. Earnings decreased 15% on a year-over-year basis. Operating revenues of $2.89 billion lagged the Zacks Consensus Estimate of $2.95 billion. The top line increased 2% year over year due to higher passenger revenues. ALK anticipates third-quarter 2024 EPSbetween $1.40 and $1.60. The mid-point of the guided range is below the Zacks Consensus Estimate of $2.19. For 2024, adjusted EPS are expected between $3.50 and $4.50. The mid-point of the guided range is below the Zacks Consensus Estimate of $4.55.
Currently, ALK carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
3. Spirit Airlines expects revenues of $1.28 billion for second-quarter 2024. The new guidance is below the mid-point of the previously mentioned $1.32-$1.34 billion. The adjusted operating margin is expected between (13.5%) and (12.5%) compared with the earlier mentioned (9%)-(11%). The adjusted operating loss is expected to be $160-$173 million compared with the previously mentioned $121-$145 million.
4 Fitch Ratings upgraded Delta’s credit rating to investment grade, owing to the airline company’s financial performance and upbeat demand for air travel, apart from the airline’s debt-reduction efforts. Delta was upgraded to “BBB-”, which is an investment-grade rating. Fitch Ratings is one of three major agencies to evaluate and assign ratings to companies based on financial metrics.
Performance
The following table shows the price movements of the major airline players over the past week and during the last six months.
The table above shows that most airline stocks have traded in the green over the past week. The NYSE ARCA Airline Index gained 1.6% to $56.5 over the past five trading days. Over the past six months, the NYSE ARCA Airline Index has declined 5%.
What's Next in the Airline Space?
Second-quarter 2024 earnings results from American Airlines (AAL - Free Report) are expected on Jul 25.
We expect the results of AAL to be aided by high passenger revenues, owing to upbeat air travel demand. With the summer season partially falling in the second quarter, buoyant air travel demand in the summer holiday period is likely to have boosted the company’s top line in the quarter under review. However, high labor costs are likely to have dented its performance. Like its peers, discounting pressure at the low end of the market may have hurt AAL’s pricing power, in turn impacting its performance.