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Airline Stock Roundup: Q2 Earnings at American Airlines, Southwest, Spirit Airlines & Others

The past week was dominated by earnings data with airline heavyweights like Southwest Airlines LUV, American Airlines Group AAL, Spirit Airlines SAVE and Alaska Air Group ALK reporting their respective second-quarter 2017 respective earnings numbers. While there was an improvement on the unit revenue front, higher labor costs continued to hurt the bottom line.

On the non-earnings front, Delta Air Lines DAL strengthened its partnership with Air France by virtue of a 10% equity investment in the latter, as part of its expansion initiatives. On the price front, the NYSE ARCA Airline Index fell 2.63% to 1.46 over the past week.

Transportation - Airline Industry 5YR % Return

 

Transportation - Airline Industry 5YR % Return

(Read the last Airline Stock Roundup for Jul 26, 2017)

Recap of the Past Week’s Most Important Stories

1. Alaska Air Group that acquired Virgin America last December, performed well in the second quarter of 2017. The carrier’s earnings of $2.51 per share beat the Zacks Consensus Estimate by a penny. Moreover, the bottom line expanded 18.4% on a year-over-year basis. Results were aided by higher revenues.

Revenues came in at $2,102 million, just ahead of the Zacks Consensus Estimate of $2,096.3 million. The top line grew 41% on a year-over-year basis (read more: Alaska Air Group Tops Q2 Earnings, Revenue Estimates).

2. Southwest Airlines reported better-than-expected earnings and revenues in the second quarter of 2017. The carrier’s earnings per share (on an adjusted basis) of $1.24 beat the Zacks Consensus Estimate of $1.20. Earnings improved 4.20% on a year-over-year basis.

Operating revenues of $5,744 million were marginally above the Zacks Consensus Estimate of $5733.2 million. Revenues also improved 6.69% year over year. Passenger revenues accounted for the bulk of the top line (read more: Southwest Airlines Beats on Earnings & Revenues in Q2).

3 American Airlines Group Inc.’s second-quarter 2017 earnings (adjusted) of $1.92 per share surpassed the Zacks Consensus Estimate by 5 cents. Moreover, quarterly earnings improved 8.47% on a year-over-year basis.

Results were aided by higher revenues. Revenues of $11,105 million also improved 7.16% from the year-ago figure. Quarterly revenues edged past the Zacks Consensus Estimate of $11,086.7 million. Strong demand for air travel coupled with improving yields drove the top line in the quarter under review (read more: American Airlines Tops Q2 Earnings, Revenue Estimates).

American Airlines carries a Zacks Rank #2 (Buy). You can see https://www.zacks.com/stocks/buy-list/?ADID=zp_1link&ICI... _1link">the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

4. Spirit Airlines’ second-quarter 2017 earnings (on an adjusted basis) came in at $1.14 per share, beating the Zacks Consensus Estimate of $1.11. Earnings increased 2.7% on a year-over-year basis.

Spirit Airlines reported operating revenues of $701.7 million, just short of the Zacks Consensus Estimate. An increase in non-ticket revenues contributed to the top line, which expanded 20.1% year over year. Total revenue per available seat mile increased 5.7% year over year due to the shift in Easter. Load factor (% of seats filled by passengers) decreased to 85.3% from 86.4% in the year-ago quarter. Load factor decreased as traffic growth (12.1%) was outpaced by capacity expansion (13.6%).

TRASM for the third quarter is expected to decline in the band of 2% to 4% on a year-over-year basis.Cost per available seat mile, excluding special items and fuel increased 10% in the second quarter. The metric is expected to increase in the band of 2% to 3% in full-year 2017. For the third quarter, the metric is projected in the band of -1% to +1%. Capacity is projected to expand 21.5% and 16.5% for the third quarter and full-year 2017, respectively.

5. Allegiant Travel Company’s ALGT second-quarter earnings of $2.94 per share missed the Zacks Consensus Estimate by $0.02. Moreover, earnings declined 20.11% from the year-ago figure due to higher costs. Quarterly revenues, however, increased 16.2% year over year to $400.6 million, edging past the Zacks Consensus Estimate of $399.8 million (read more: Allegiant Misses Q2 Earnings Estimates, Stock Falls).

6. Delta announced its decision to invest €375 million in Air France-KLM Group. Apart from strengthening their association, Delta will acquire a seat in Air France’s board through this step. In a customer-friendly move, Delta, Air France-KLM and Virgin Atlantic will launch a combined long-term joint venture with Air France investing 31% in Virgin Atlantic.

Performance

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

Company

Past Week

Last 6 months

HA

2.8%

-16.34%

UAL

-3.24%

-5.1%

GOL

0.3%

46%

DAL

-2.31%

6%

JBLU

-0.63%

13.42%

AAL

0.93%

15.91%

SAVE

-15.51%

-24.3%

LUV

-6.6%

5.7%

CPA

-1.4%

31.2%

ALK

-2.3%

-8.7%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The table above shows that most airline stocks traded in the red over the past week, resulting in the NYSE ARCA Airline Index declining. Shares of Spirit Airlines depreciated the most (15.51%) due to its disappointing third-quarter guidance for unit revenues. Over the course of six months, the NYSE ARCA Airline Index appreciated 3.2% on the back of impressive gains at Latin American carriers – GOL Linhas and Copa Holdings.

What's Next in the Airline Space?

The focus will remain on the July traffic reports of the likes of Hawaiian Holdings, Inc. HA in the coming days.

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Southwest Airlines Company (LUV): Free Stock Analysis Report
 
Delta Air Lines, Inc. (DAL): Free Stock Analysis Report
 
Spirit Airlines, Inc. (SAVE): Free Stock Analysis Report
 
Hawaiian Holdings, Inc. (HA): Free Stock Analysis Report
 
Allegiant Travel Company (ALGT): Free Stock Analysis Report
 
American Airlines Group, Inc. (AAL): Free Stock Analysis Report
 
Alaska Air Group, Inc. (ALK): Free Stock Analysis Report
 
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