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Airline Stock Roundup: DAL & UAL's Earnings Beat, SAVE's Q3 View Bullish & More

Maharathi Basu

In the past week, Delta Air Lines DAL initiated third-quarter 2019 earnings season for the airline space. The carrier delivered better-than-expected earnings while revenues lagged expectations. More than the revenue miss, it was the below-par fourth-quarter 2019 earnings per share guidance that disappointed investors. Consequently, this Atlanta, GA-based airline’s shares declined on Oct 10 despite the earnings beat.

Like Delta, United Airlines Holdings UAL beat on earnings while it missed on the revenue front in the third quarter. However, shares of this Chicago-based carrier appreciated following its earnings outperformance on Oct 15 as well as the raised current-year earnings guidance. For 2019, the company now expects earnings between $11.25 and $12.25 compared with $10.5-$12 expected earlier. The mid-point of the newly guided range ($11.75 per share) is below the Zacks Consensus Estimate of $11.81. Following the bottom-line outperformance, the carrier’s CEO Oscar Munoz stated that the company was “ahead of pace’’ to achieve its earnings per share target (between $11 and $13) by 2020 end.

Spirit Airlines SAVE was another major newsmaker over the past week. This low-cost carrier provided an encouraging guidance with respect to third-quarter 2019 unit revenues as the impact of Hurricane Dorian on forward bookings was not as severe as anticipated initially. The airline expects to release its detailed results for third-quarter 2019 on Oct 23. Furthermore, JetBlue Airways JBLU and Alaska Air Group ALK released the respective September traffic report over the past week.

(Read the Last Airline Stock Roundup here).

Recap of the Past Week’s Most Important Stories

1. Delta’s third-quarter 2019 earnings per share (excluding 1 cent from non-recurring items) of $2.32 surpassed the Zacks Consensus Estimate by 5 cents. The bottom line also improved 28.9% on a year-over-year basis, mainly owing to low fuel costs. However, operating revenues in the quarter under review came in at $12,560 million, marginally missing the Zacks Consensus Estimate. But the top line increased year over year. Delta expects fourth-quarter earnings between $1.20 and $1.50 per share. (Read more: Delta Beats on Q3 Earnings, Stock Down on Dull Q4 View).

2. United Airlines’ third-quarter 2019 earnings (excluding 8 cents from non-recurring items) of $4.07 per share outpaced the Zacks Consensus Estimate of $3.94. Moreover, the bottom line improved 33% year over year, mainly on lower fuel costs. Although operating revenues of $11,380 million increased 3.4% year over year, the same missed the Zacks Consensus Estimate of $11428.2 million. Passenger revenues, which accounted for bulk (92.1%) of the top line, rose 3.6% year over year, thereby aiding the top line.

Consolidated passenger revenue per available seat mile (PRASM: a key measure of unit revenues) inched up 1.7% year over year. Also, total revenue per available seat mile increased 1.5%. Meanwhile, consolidated unit cost or cost per available seat mile (CASM) — excluding fuel, third-party business expenses, profit sharing and special charges — inched up 2.1% year over year. However, total unit costs slipped 0.9% year over year with average fuel price per gallon (on a consolidated basis) decreasing 12.9% year over year to $2.02.

United Airlines expects fourth-quarter 2019 capacity to increase approximately 3% year over year. Meanwhile, fourth-quarter PRASM is forecast to either remain flat year over year or increase up to 2%. However, adjusted non-fuel unit costs are predicted to rise nearly 3.5%. Capacity for the full year is again expected to expand approximately 3.5%.

United Airlines carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

3. Spirit Airlines now expects third-quarter 2019 total revenue per available seat mile (TRASM: a key measure of unit revenues) to dip 2% year over year (earlier projection estimated a 2.5-3.5% decline). The guidance with respect to costs was also encouraging. The company now expects adjusted operating expense per available seat mile excluding fuel to increase approximately 8.5% year over year in third-quarter 2019 (past prediction saw a 9-10% year-over-year increase). (Read more: Spirit Stock Up on Improved Q3 Unit Revenue View).

4. At JetBlue, September traffic, measured in revenue passenger miles (RPMs), increased 3.4% year over year to 4 billion. Consolidated capacity (measured in available seat miles/ASMs) also expanded 2.5% to 5 billion on a year-over-year basis. Moreover, load factor (% of seats filled by passengers) grew 60 basis points (bps) to 80.3% in the month as traffic rise outpaced capacity expansion. The company expects third-quarter 2019 RASM to slip approximately 0.9% year over year. 

5. Alaska Air Group now anticipates third-quarter 2019 RASM in the range of 13.61-13.64 cents, representing an approximate 4.4% ascent year over year. Previously, RASM was anticipated to climb in the 3-5% band.

Additionally, cost per available seat miles excluding fuel and special items is projected between 8.43 cents and 8.45 cents, indicating an increase of approximately 3.4% from the prior-year reported number. Previously, the metric was anticipated to increase approximately 5% year over year. The estimate for economic fuel cost per gallon has now been decreased to $2.13 from $2.15. The new projection indicates an 8.6% decline from the year-earlier reported figure. Alaska Air Group is scheduled to release results for third-quarter 2019 on Oct 24.

On a separate note, Alaska Air Group’s load factor for September improved 220 bps to 83% as traffic growth (6.4%) outpaced capacity expansion (3.5%).

Performance

The following table shows the price movement of major airline players over the past week and during the last six months.

The table above shows that all airline stocks apart from Delta traded in the green over the past week resulting in the NYSE ARCA Airline index gaining 4.4% to $102.58. Over the course of past six months, the NYSE ARCA Airline index has been flat.

What’s Next in the Airline Space?

Investors will keenly await third-quarter 2019 earnings reports from the likes of Hawaiian Holdings HA and JetBlue on Oct 22.

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Spirit Airlines, Inc. (SAVE) : Free Stock Analysis Report
 
Alaska Air Group, Inc. (ALK) : Free Stock Analysis Report
 
Delta Air Lines, Inc. (DAL) : Free Stock Analysis Report
 
JetBlue Airways Corporation (JBLU) : Free Stock Analysis Report
 
Hawaiian Holdings, Inc. (HA) : Free Stock Analysis Report
 
United Airlines Holdings Inc (UAL) : Free Stock Analysis Report
 
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