You know what they say about stocks, or sectors, that show relative strength in a down market ... bodes well for the future ... you want to be in them when the market turns.
Prasm was better for the quarter, but asm's were less than planned, so revenue probably stayed close to what it was before. Knocking off another .5 in margins probably takes away $60 million. It can still hit estimates depending on share count and how close to midpoint their numbers are.
To be safe, I hope quarterly estimates tick down a few. But overall things are still moving along. The dollar is the dollar, and adjustments can be made ... rapid changes within a quarter are hard to deal with immediately.
I see room for negative spin, but really won't be negative. AAL plans increased stage length and fewer departures, saving fuel, but this will also hinder prasm. More asm's will cover that and hopefully cover it plus some.
One positive is that the negative yoy comp of VZ goes away in Q3. And economic conditions should improve going forward ... another positive.
Different segments of Wall Street investors are attracted to different investments ... growth, value, etc.
If oil settles out around $75, some synergies come in and the industry gets a grip on revenues, I'll take the projection of earnings, as well as value.
AAL characterized the current prasm weakness more as 2015 plans encountering some turbulence and airlines will adjust. Currency and world economies created some initial clouds coming into 2015 ... it has for most industries. The industry will tweak its way through things. 2015 initial plans weren't right for conditions.
AAL said Europe was strong ... it was weak going into Q1. AAL said at the end of January 4 countries in South America were weak ... in the CC it was only Brazil and VZ.
Just a matter of a few weeks required, bears (I know you know). And historically, drilling fracking wells follows the price of oil. It'll be a lot quicker and cheaper with the latest technological advances.
Right now there are many wells that are drilled, but not being fracked ... so those can be had even quicker. There is also consideration being given to re-fracking old wells (50,000 wells) ... (the old "frack and pray"), but there are companies that feel technological changes make it so there is less praying required.
With interest rates so low, it always seem out of line to me that the Fed would use a rate hike of .25, which they used at a more normal interest rate level. This was mentioned by some a few weeks ago, and I certainly understood, but why wouldn't the Fed, if it was concerned about going too fast with an interest rate hike, just to start with an 1/8 instead of .25? It would be a start, and they could certainly do it again, or slow down depending on things. Anyway, who knows ...
Everyone probably knows this already, but if over the road trucks in the US switched to nat gas, it would save 2 million barrels per day ... so there are areas to substitute ... and do that all over the world.
// They can pay down the debt and that would be a better use of the money IMHO. //
One way to look at whether to pay down debt or return to shareholders is to look at the PE (This is just framing the question, not all that goes into it). If the PE is 8, the inverse implies a 12% return. If the company can pay off a 5% loan instead, what would you choose? A 5% cost of capital (and should look at this over the business cycle) implies a PE of 20 (the inverse of 5%). Buying the stock is a better deal. It's an art ... have to look at things over the business cycle ... even the PE.
// I've already doubled my HA short @ $24. //
It looks like HA at least wants to fill the gap just above $25 ... I would have waited ... but then again I don't short stocks in bull moves.
That said, HA did leave a gap this morning, but it may end up being a high volume breakout gap that doesn't need filling. You know stoxx, airline stocks usually move somewhat together. I can understand not buying some, and buying others, but shorting one and going long another ... what's your goal? ... to breakeven?
// analyst have to lower 2q estimates //
cav ... I agree. I just worked out the numbers (worked them out a few different ways), and if they don't hit the better side of midpoint guidance, I have a hard time getting above $3 bucks ... (I'll redo them, but I don't think I overlooked anything.)
Anyway ... those are still remarkable earnings relative to the stock price.
// The value of free information ... //
The info ... 2016 estimates ... can be figured out by all and compared. So, what is the value of the analysts saying it will be between $4 and $11? 2016 estimates could be confusing if apples are being mixed with oranges.
// See, these guys never actually post their trade before //
Who cares about your, or anybodies', trades? I would think people only care about their own. People can make up anything they want about their trades/investments on a message board ... it should be considered just noise. I think people use message boards to get fundamental and technical information.
Plenty of oil cav ... Iraq is pumping and plans to double over the years ... Iran and Libya in the wings. I still say we could get a switch to nat gas for over the road trucks ... over time ... another 2M per day savings. And speaking of that, the Saudis are not only worried about shale, but also the impact of alternative energy in the future ... they don't want to make that too attractive. But we all know the price of oil has its own crazy nature.
For 2016, the words I heard were margins "above" 2014 and "thinner" than 2015 (remembered the word) .... yes, between 2014 margins and 2015 margins with some color.
And who knows, GDP could pick up and/or someone might scale back. DAL announced some capacity reduction later this year, didn't they (maybe that was international) ... their growth internationally raised some eyebrows earlier in the year ... they're making some adjustment. 2016 capacity growth by LUV is international as opposed to domestic, if I caught the drift. It's still capacity though.
Has anyone actually calculated what the cost of competing with Spirit out of Dallas to Las Vegas is? What would be the cost for AAL to run 4 more flights to LAS and charge "0" for a quarter and what would the EPS impact be? Obviously, they wouldn't compete like that, but it gives you what might be the worst case scenario.
Has anyone figure what would be the cost to the whole industry if they decided to compete with Spirit's whole network per year? That's not going to happen, but Spirit may want to consider staying in its niche.
// nada for Doug Parker being smarter //
I've found it sort of amusing watching the subtle jabs between Parker and Anderson ... both extremely good. Parker certainly was the first to preach capacity discipline back in early-mid 2009 and between the end of 2009 and end of 2010 the whole industry caught on. And Parker is doing it now and we have Anderson cutting after Labor Day (others will be in line). Notch one for Parker (oligopoly leader). Anderson likes to talk about operating profits and Parker pre-tax profits ... for various reasons ... that's a little jab. Now Anderson talks about free cash flow of $20 billion between 2015-2017 ... he knows Parker if fleet building at AAL and the subsequent capex ... I could see Anderson with his tongue in cheek wondering what Parker was thinking. All amusing.
// The reality is oil at 60 //
Oil down is real as you say ... it's real money. The article can single out AAL, but it is really a snapshot in time. AAL just finished the labor contracts ... others (at least LUV and DAL) still have labor contracts coming up (and higher costs) ... after the res system is done, AAL has synergies to look forward to.
They say don't consider taxes when it is a time to sell, but I've been wondering about hedge fund selling for quite awhile. Treatment of "carried interest" as long term cap gains has been an issue, and every year there is a threat to change the tax treatment of carried interest, but soon it might be more than a threat. That being the case it would probably be an incentive to hedge funds, and others paid with carried interest that they sell assets with long term outsized gains. There are probably quite a few out there in the financial world that are wondering how they'll be treated tax wise in the near future. Why wait for an extra 15-20% increase in an assets appreciation if you are going to have taxes increase 15-20%? It certainly can create volatility if that is going on.
Changing the treatment of carried interest would normally be a legislative area, but the executive branch could do it ... just change an IRS ruling.
Just one more thing to add to the pile.