NEW YORK, Dec. 12, 2014 (GLOBE NEWSWIRE) -- The NASDAQ OMX Group, Inc. (NDAQ) today announced the results of the annual re-ranking of the NASDAQ-100 (Nasdaq:NDX), which will become effective prior to market open on Monday, December 22, 2014.
The following three companies will be added to the Index: American Airlines Group, Inc. (AAL), Electronic Arts Inc. (EA) and Lam Research Corporation (LRCX).
18.3% operating margin is very high...Baker has always had the highest target prices and outlooks, sure hope he is correct. I agree with his thesis...
Agree per PS though interesting to note that LCC had PS.....IMO will be a big win for Parker if no PS...Pilots much more important than FA per can delay flights, really screw things up in a subtle way..all due respect to FA but I could fly fine without them . Maxon has been a very good source of information especially before the merger, I followed him regularly.
Agree SW more of a concern..I have flown AirTran for years and finally being switched over to SW and must say I have been impressed so far though I am not crazy about no assigned seating. I like the option of paying up for better seating.
It’s every airline investors’ worst nightmare–heightened competition leading an airline to deliver disappointing numbers. And that’s exactly what happened to Spirit Airlines (SAVE), which cited competition with Southwest Airlines (LUV) for its disappointing guidance. Stifel’s Joseph DeNardi and Sawyer McKelvey have the details:
Agence France-Presse/Getty Images
Clearly, we were surprised by Spirit’s guidance revision yesterday evening, but believe it’s important to keep in mind a few things relative to the announcement: (1) the downward revision was 50 bps, with the 4Q margin range (18%-19%) still representing very strong performance; (2) if Southwest is competing with Spirit on price, they’re losing money doing it; as a result, we view the pricing pressure Spirit is seeing out of Love Field as temporary in nature; (3) Spirit has shown itself to be very agile with capacity deployment, pulling out of markets that don’t work; and (4) we continue to see a tendency for sell-offs to be overdone on any negative data points and suspect today’s decline is no different.
We were surprised to hear Spirit indicate that it is seeing pricing pressure as a result of airlines trading off lower fuel costs for lower yields, a dynamic which is resulting in a narrower gap in fares between Spirit and its competitors further along the booking curve.
With other carriers, including American Airlines (AAL), Delta Air Lines (DAL) and United Continental (UAL) tumbling, DeNardi and McKelvey advise that extrapolating Spirit’s commentary to the industry may be inappropriate.” They explain:
What we struggle with the most from Spirit’s announcement is whether it represents what one carrier is seeing (and a carrier whose business model and pricing strategy is fairly unique in the industry, at that) or an indication of what we can expect to hear from other airlines in the industry. At this point, we have yet to hear similar commentary from other carriers, and, in fact, have heard the opposite
I am not very familiar with Spirit's business but sounds kind of similar to Allegiants in that not as good a deal as first appears. My guess is we will hear from additional analysts as far as the feedback they are getting from the large airlines on this matter.
Cohen did say I believe that aal's lower prasm could be due to lower fuel costs..interesting that Spirit still expects strong margins like aal , they reduced only by half percent.
"Low-fare carrier Spirit Airlines Inc. led the plunge after giving a disappointing profit outlook and saying that airlines may be reducing fares due to those lower fuel prices."
Above quote is what should be a concern as everyone is assuming fares will hold up even with crashing fuel costs. Like to hear if other airlines agree with Spirit's assessment. I have always been concerned that too low fuel costs would lead to lower fares and that is still my main concern. My guess is we will see lower fares but not significantly lower and not low enough to offset the fuel savings.
"Airline shares fell even faster than the slumping stock market Tuesday, an unexpected setback for a sector that has seen numerous all-time highs of late as fuel prices tumble.
Low-fare carrier Spirit Airlines Inc. led the plunge after giving a disappointing profit outlook and saying that airlines may be reducing fares due to those lower fuel prices.
That came as a surprise to investors, who have been reassured by industry leaders that cheaper fuel would boost profits, not help passengers. In recent weeks, executives at several big airlines said that travel demand was strong enough that they didn't need to cut fares"
Definitely why aal down today....
Agree primarily due to Spirit news...on top of yesterday's PRASM report..would think stronger economy, rising employment/wages will be good for airlines in 2015...Love Field per Wright Amendment, VZ and Int'l are current drags.
"In addition, the company continues to expect fourth-quarter pre-tax margin excluding special items to be between 10 and 12 percent."
Like to know what 1q-3q margin guidance will be as 4q is usually significantly lower.. 12% for year would put pre tax eps at around 8$ share I believe...I am not aware of any 2015 guidance....any thoughts?
Let's hope the pilots don't get too greedy due to the fuel drop and we can get a reasonable agreement this week, believe 15th was the tentative deadline.
My guess is the old AMR is a drag on the numbers not LCC..Parker recently commented that he was surprised that AMR planes were in such poor condition, good reasons went BK....as per fuel savings they never seem to end up as big as expected when the quarterly reports come out but I also expect that to change in 2015 ..
He's still positive overall especially on aal due to no fuel hedges, he was way ahead of the curve(about 2 years) on calling the sector turnaround and hopefully is way ahead with this call.
Wolfe Research’s Hunter Keay took a lot of heat when he first expressed his fear that cheap oil might be bad news for carriers like Delta Air Lines (DAL), American Airlines (AAL) and United Continental (UAL). At the time, he worried that lower fuel prices would cause airlines to forsake the capacity discipline that has been a big part of their revival.
Agence France-Presse/Getty Images
Well, Keay is back at it today, offering another reason to fret about falling fuel prices–that the focus on fuel will cause investors to pay less attention to the factors that airlines can actually control. He explains:
Fuel matters in the context of earnings and valuing airline stocks. But we worry that the airline thesis is shifting, as it feels like investors are beginning to focus too much on the direction of jet fuel and focusing less on controllable factors. The bull thesis on airlines over the last several years has been predicated on capacity discipline, consolidation, and unbundling. Those three key points are still generally intact but some investors seem to be focusing on low fuel as a catalyst and the main reason to own these stocks. We believe that is shortsighted and does nothing to make us feel better about the first of the prior three points, which has its genesis in higher fuel prices forcing good behavior. We also think the perceived inverse relationship with fuel is destructive for the potential for this group to re-rate and trade like industrial companies. Of course, airlines that yearn to be valued like high quality transportation/industrial companies would also make note that very few of those companies hedge fuel aggressively.
Keay also notes that not all airlines will benefit from lower fuel prices equally thanks to different hedging practices. He explains:
Disclosures around fuel hedging are poor, but some airlines volunteer more information than others…No airlines except for American Airlines, Allegiant Travel (ALGT), and WestJet Airlines (WJA) will participate fully in the fall in jet fuel prices because of the existence of hedges or premium expenses. Hedge books are almost surely in loss positions. We think it is unlikely that a non-hedged airline would view the pullback as an opportunity to load up on hedges. All else equal we would view that as a tactical error, as it would probably just turn that airline stock into an inverse bet on oil.
None of that stopped Keay from raising his target prices on some of the airlines he covers. His target price on American Airlines goes to $67 from $56, on Southwest Airlines to $48 from $44, on Spirit to $114 from $111 and on United Continental to $74 from $66.
Shares of American Airlines have jumped 3.4% to $51.33 at 11:05 a.m. today, while United Continental has soared 4.6% to $64.60, Southwest Airlines has gained 1% to $41.82, Delta Airlines has risen 1.7% to $47.21 and Spirit Airlines has advanced 1.1% to $84.11.
though he recommends that investors “focus on names that have positive and underappreciated company-specific non-fuel stories, like Alaska Air (ALK), Spirit Airlines (SAVE), American Airlines, United Continental, and (to a lesser extent) Southwest Airlines (
Unnerving to hear Hunter's opinion as he has been spot on for years but I agree that it's too early to be concerned about overcapacity. LCC was trading at 60$ in about 2005 at a PE of around 13 with a whole bunch of competition/capacity compared to today..
Was surprised to hear he was cautious on sector saying too low fuel costs will lead to increased capacity which will come back to bite airlines when oil/fuel rises. He has been spot on the past few years but imo he is too far ahead of the curve per his capacity concerns.