If you assume that revenue were 3/4% better than expected then it would be about 75mm better than the middle of guidance from the 1stq call. Most of this marginal revenue should drop to the bottom line or about 20 cents a share higher than current estimates. Higher earnings should lead to a higher P/E and move us back to the mid 50s in short order.
Longer term we should see more money flow into LOW P?E cyclical stocks as consumer staples and utilities
are well overvalued with record P/E ratios. and Bonds offer no yield at all. Airlines could double and still have value in this market.
Every time I see another line sold the article seems to indicate that they will now be able to close and then a few days later i see another line has a buyer. Are we near the end or do we still have to trim current product lineup to please the regulators?
Why would someone wait until the last few seconds from the close on a Friday prior to a 3 day weekend to trade more than a normal days worth of volume? It looks to me as if a short were trying to make the stock fall thru to 50 day moving average. Next week will probably have thin trade across the board and this stock (normally thin trading) should be easy to kick around.
If you assume they issue $30 billion in bonds (to refinance bank debt) taken on to buy AGN generics unit, they should save nearly $300 a year in interest costs from the time the deal was announced. with current rates this low and corporate bond spreads still tight, I would expect a large refinancing bond deal soon after the unit is purchased in the next week or two. Interest savings alone should boost earnings about 30 cents a share higher than when the deal was first made public last year. The stock could easily go back to 70 for a 40% gain in the next year.
I'm old enough and have seen many cycles where valuations seemed cheap but when the cycle turned the earnings vanished. This industry has changed, The airlines have been burned by over capacity time after time. Last week LUV announced that they are delaying delivery by several years on many of their jets, AAL and UAL have very tepid capacity increases. Earnings will shurley fall in the next downturn but we should not see the losses that have been experienced in past recessions. The industry has been repurchasing share and will probably soon increase dividends and not overextending capacity.
The airline market is priced as if we were already entering a recession. We havn't seen over capacity built in other industries and the housing sector is well under control in contrast to other economic cycle peaks.