As we get into the heart of earnings season, one industry to highlight in particular is the airline industry. This sector has enjoyed the decline in oil prices over the last few months, there are increased profit margins across the board for the industry, leading to a number of earnings beats and strong outlooks.
One such airline benefitting from low oil costs is Southwest Airlines (NYSE:LUV). The company recently reported a beat on our consensus earnings estimate by 5 cents per share (read Southwest Airlines Beats on Earnings and Revenues). As a result of the earnings beat, Southwest Airlines closed up over 8% for the day.
Yet while LUV is still a strong choice, there are plenty of other airlines that look promising to start 2015. Here at Zacks, we have handpicked 3 airline stocks that are in this group and are worth considering as a new pick for your portfolio. Of course, they all hold a Zacks Rank #1 and may be interesting choices ahead of their earnings reports too:
Allegiant Travel Company (NASDAQ:ALGT)
Allegiant Travel made headlines on Zacks recently, as it was the Bull of the Day. Of course, a large part of this is fueled by the lower oil costs, as with the rest of the industry. What makes this airline unique compared to others is that it doesn’t hedge its fuel costs.
This results in even wider margins compared to its industry peers, since it is buying oil at a cost lower than most airlines. The costs that airlines incur with fuel are one of the largest expenses for the industry as a whole. The industry has a one-up on the market, but Allegiant Travel has a one-up on the industry.
Allegiant Travel has an Expected Earnings Surprise Prediction of 24.09% for the quarter. That coupled along with a Zacks Rank #1 is a strong indicator that the company is likely to have a beat when reporting earnings.
Allegiant also has an expected EPS growth of 33.57% for the year. This shows that the company has momentum pushing it forward in order to meet the demands of investors. The airliner also has a growth rate this year of 28% compared to 13.1% for the industry. This makes Allegiant Travel stand out as a pick that exceeds the standards of an already thriving industry.
Additionally, Allegiant Travel has reported positive surprise earnings in 3 of the last 4 quarters. The consensus earnings estimate has moved up consecutively in the last 90, 60, 30, and 7 day periods.
7 days ago, had a consensus estimate of $1.37 per share. Since then, it has moved up to $1.41 per share. There are numerous indications of positive momentum pushing this company forward going into earnings, so it is reasonable to expect a beat when the company reports earnings on 1/28/15.
Deutsche Lufthansa AG (OTC:DLAKY)
Lufthansa is the largest airline in Europe. It carries the most passengers in the continent, and also has the largest fleet of planes within the region.
This German airliner has climbed the ranks, going from a Zacks Rank #5 last week to a Zacks Rank #1. has a massive growth rate for the year, compared to 13.1% for the industry. The trailing twelve months Price/Earnings ratio is 11.71, compared to 36.77 for the industry.
This would indicate that Lufthansa is undervalued compared to its peers within the industry. With a Price/Cash flow ratio for the most recent fiscal year of 2.95, compared to 7.33 for the industry, one can see that Lufthansa has more liquidity and equity value to fall on. This makes for a sound investment, especially with the extra security of a 2.5% dividend.
Lufthansa has an earnings report on 3/12/15. Why not pick out the cream of the crop and start buying an airline poised to experience gains, which is also likely to post beats going into the earnings report? Keep an eye on this company, as the stats would suggest that this airliner is likely to surprise in the short term and it may be a stock off your radar as well.
Hawaiian Holdings Inc (NASDAQ:HA)
Hawaiian Airlines is a growing company making strides in the airline industry. The airline set a new record with around 10.2 million travelers in 2014, up 2.6% from the previous year. Watch out for this company seeking to expand its destinations. Hawaiian Airlines is arguing its case now to occupy a slot between Tokyo International Airport (Japan), and Kona Airport (Hawaii).
The Hawaiian based airline makes a compelling case, arguing that if it got the slot, it would create at least 3 times the economic impact than other competing airlines. These companies competing for the slot include American Airlines (NASDAQ:AAL) and Delta Air Lines Inc (NYSE:DAL). It will be interesting to see how this unfolds and if Hawaiian Airlines manages to get the slot, it should considerably benefit the company and its expansion plans to Asia.
Hawaiian Airlines was a Zacks Rank #2 (Buy) just last week, and is now a Zacks Rank #1(Strong Buy). This along with an earnings Expected Surprise Prediction of 10.53% indicates that there is an increased likeliness that the company will have beats on earnings going into the report.
The trailing twelve month net profit margin was 3.3%. To put this into perspective, American Airlines (NASDAQ:AAL) has a net profit margin of only 0.72%. There is a lot of momentum and positive statistics supporting Hawaiian Airlines as it approaches its earnings date, which is on 1/29/15.