// This Cowen girl has a whole lot to clear up //
Well, one thing I know she didn't say, is what the Street said she said. And those numbers look an awful like Q1 2014 numbers. Anyway, a few years ago Helane Becker really went out on a limb against LCC and Parker, and she was so wrong ... surprised she is doing it again.
Fare sales, etc have happened every year since industry capacity discipline started 5 years ago. Every year capacity discipline has been questioned by the talking shirts. All carriers are tweaking things, but nothing drastic yet. I'll bet that the industry knows what behavior is best.
"how much haircut to 5 p/e is warranted."
It's magic ... if eps drops for taxes, the PE will rise. Why do you think the PE's are so low now on reported pre-tax earnings?
DAL is not paying taxes as far as I know, but could be getting close. They have to report their eps as if they were paying taxes though, so after-tax reporting, but it is not a cash expense. It all has to do with the way the NOL's are classified as to how you report ... whether pre-tax or after-tax.
When DAL started to report after-tax eps, their PE just jumped from an 8 area to the 12 area ... essentially, no change in stock price. This is the same thing that happened to LCC even though they still had NOLs. LCC was reporting after-tax.
Once the NOL's are used up, balance sheets will be much improved.
He was going to lead a protest Sunday. I think he was killed 20 minutes before market close.
Putin will investigate ... took the investigation under his control.
This year the Gulf will be producing more, and wells added. The new drilling techniques are being applied in the Gulf. These are wells that will produce for 10+ years.
Lots of things changing, and it is hard for people to discern what is real, and what is a head fake.
If you take eps last year and knock it down to $5/shr. due to labor costs, and assume Brent goes to $80 (not saying it will), then the fuel savings should be another $3/shr. So, that is $8/shr. if Brent is at $80 for the full year, which it won't be. In 2016 it could be at $80 for the full year, but by that time synergies plus normal demand should kick in and that makes up for the labor costs knock off in 2015. So, $8+ with trading between a 5 and 8.5 PE.
ae ... Brent doesn't come here, but we import products made with Brent, and our refineries just sell their products at the same price as the products imported because they can. It's been going on for years.
So, as long as the WTI-Brent relationship holds, lower WTI doesn't translate to lower product prices, but translates to higher refinery prices for products even if they use the lower cost WTI.
This is like watching paint dry ... The CFTC put the position limit and aggregation proposal out for public comment again ... 4th+ time in a year. And this has been going on for over 5 years. Essentially, it will limit positions (aggregated across entities with ownership control) for 28 agricultural, energy and metal commodities. The comment period closes on March 28th. The CFTC needs to do this without watering the proposal down ... they've watered it down some already.
There is huge pushback from some industries and those that like their derivative swaps and don't want transparency, or if transparent, not to be accused of manipulative positions. Shortly after the Commodity Modernization Act of 2000, which deregulated derivatives, and the few years it took to come up with creative derivative products ... you know, commodities and other areas of the financial world have been screwed up. We've all been fed cool aid ... yup, supply and demand. Well, commodities look to futures for determining price ... not necessarily supply and demand. Since the early-mid 2000 commodity derivative swaps with no position limits gave the futures market something to "key off of" for price discovery, and subsequently the futures market provided price discovery for the commodities ... how accurate was our futures market?
Don't get me wrong, speculation is necessary, but just as there can be too little speculation, there can be too much. The CFTC has already come out and said they feel there was 20-25% manipulation (whisper number higher) with oil at $70 and that was a number of years ago when the dollar was weak ... that's in the Federal Register.
The CFTC needs to do what is right. Inaccurate prices in an economy leads to a misallocation of resources ... and an economy that is less than it could be.
// ... please go to EIA site, they show daily WTI, Brent, Jet Fuel, heating oil. //
unc it was your "project" (showing the price comparisons) ... I was just saying if you used Brent it might give a better relationship ... but there is that lag. Anyway, was just commenting because you posted it and thought it was something you were interested in.
unc ... since jet fuel is priced off of Brent ... how does the comparison work with Brent? And then it would have to be jet fuel from Brent with the production lag ... (still probably is goofy)
unc ... if the only part of delivered jet fuel that changes is the oil component ... every $10 change in Brent is about 25 cent per gallon.
cav ... understand what you're saying. Re: Helane Becker, it looks like she is assuming revenue pressures because of lower oil, but assumes too that oil will rise. We'll see how that plays out.
cav ... It seems you are double adjusting for risk. One for potential lower earnings due to oil going back up, and again using a lower PE. Anyway, take what you think will be an after tax earnings and use a 12-13 PE (or an 8.5 pre-tax PE). Anyway, it seems there is a double risk adjustment.
Let's assume they make only $5/share with oil at $100. Oil at $80 is a 50 cent savings from $3.00 jet fuel, or 50 cents times 4.4 billion gallons. That puts eps between $8 and $9/share not counting potential synergies. Using an 8.5 PE is reasonable for figuring price target.
If you assume oil is going back to $100 (difficult with currencies the way they are), and there are some synergies, the stock is fairly valued in this area.