Airline Stock Roundup: Earnings Beat At American Airlines, JetBlue; Southwest Airlines Falters

With the second-quarter 2016 earnings season picking up pace, the past week saw airline heavyweights like American Airlines Group (NASDAQ:AAL) , JetBlue Airways Corporation (NASDAQ:JBLU) Alaska Air Group, Inc. (NYSE:ALK) and Southwest Airlines (NYSE:LUV) reporting their respective earnings numbers. While American Airlines, JetBlue and Alaska Air Group reported better-than-expected earnings aided by soft oil prices, Southwest Airlines’ bottom line lagged expectations. Apart from the earnings miss, the low-cost carrier issued a downbeat guidance for the third quarter, sending its shares skidding.

Moreover, the carriers continued to struggle with respect to revenues with woes related to passenger revenue per available seat mile (PRASM: a key measure of unit revenue) at the forefront.

On the price front, the NYSE ARCA Airline index decreased over 1% to $89.47 during the course of last week, with carriers continuing to struggle with respect to unit revenues. Lufthansa’s (OTC:DLAKY) disappointing guidance, as its operations were negatively impacted by the rise in terror attacks and the uncertainty following the Brexit vote, also hurt stocks resulting in the index losing value.

Read the last Airline Stock Roundup for Jul 20, 2016.

Recap of the Past Week’s Most Important Stories

1. American Airlines reported better-than-expected earnings in the second quarter of 2016. The company posted adjusted earnings per share of $1.77, beating the Zacks Consensus Estimate by 12 cents. However, quarterly earnings declined over 32% on a year-over-year basis. Moreover, the carrier announced its decision to defer the delivery 22 wide-body jets from Airbus (read more: American Airlines Q2 Earnings, Sales Beat; Down Y/Y).

2. Low-cost carrier JetBlue Airways’ second-quarter 2016 earnings (excluding special items) of 53 cents per share beat the Zacks Consensus Estimate by 4 cents. Earnings improved substantially from the year-ago figure, aided by low fuel costs. Total operating revenue climbed 2% year over year to $1,643 million, beating the Zacks Consensus Estimate of $1,635 million (read more: JetBlue Gains on Q2 Earnings Beat, PRASM Woes Stay).

3.Alaska Air Group reported second-quarter 2016 earnings per share of $2.12, which surpassed the Zacks Consensus Estimate of $2.08 and also increased 20% year over year. The commendable performance can be attributed to lower fuel costs. Quarterly revenues increased 4% year over year. Passenger revenues accounted for bulk of the top line (read more: Alaska Air Q2 Earnings Beat Estimates, Rise Y/Y).

On a separate note, the carrier’s impending acquisition of Virgin America (NASDAQ:VA) took another step toward closure with the latter’s shareholders approving the deal.

4. Southwest Airlines reported mixed results for the second quarter of 2016, missing on earnings but beating on revenues. The carrier’s earnings per share (on an adjusted basis) of $1.19 fell short of the Zacks Consensus Estimate of $1.22. Earnings, however, increased 15.5% on a year-over-year basis. The carrier anticipates RASM decline in the band of 3% to 4% for the third quarter of 2016 (read more: Southwest Airlines Q2 Earnings Miss, Revenues Beat).

5. Lufthansa has apparently trimmed its earnings per share outlook for 2016 as travel demand to Europe has been waning following multiple terror attacks and the uncertainty following the Brexit vote. The carrier said that advance bookings, especially on long-haul Europe bound routes, have been hurt by the above-mentioned headwinds. The German carrier now expects 2016 adjusted earnings before interest and taxes to be below 2015 levels (the previous guidance had hinted at the measure being slightly above the 2015 figure).

Performance

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

The table above shows that many airline stocks lost value over the past week with Southwest Airlines being the biggest laggard (4.67%). Over the course of six months, the NYSE ARCA Airline index appreciated over 17% on the back of huge gains at GOL Linhas.

What's Next in the Airline Biz?

Investors will look forward to reports from the likes of Spirit Airlines (NASDAQ:SAVE) in the coming days.