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The Zacks Analyst Blog Highlights: Delta Air Lines, United Continental Holdings, Allegiant Travel, Southwest Airlines and JetBlue Airways

Zacks Equity Research
Dril-Quip (DRQ) doesn't possess the right combination of the two key ingredients for a likely earnings beat in its upcoming report. Get prepared with the key expectations.

For Immediate Release

Chicago, IL – April 19, 2018 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Delta Air Lines DAL, United Continental Holdings UAL, Allegiant Travel Company ALGT, Southwest Airlines Co. LUV and JetBlue Airways Corporation JBLU.

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

Here are highlights from Wednesday’s Analyst Blog:

Airline Stock Roundup: DAL, UAL Beat Earnings & More

Last week, Delta Air Lines kick-started the first-quarter earnings season for the airline space. This Atlanta, GA-based carrier reported better-than-expected revenues and earnings per share. However, high fuel costs contributed to a year-over-year decline in earnings.

United Continental Holdings also reported better-than-expected results in the quarter. Results were aided by strong demand for air travel and higher ticket prices. This Chicago-based carrier’s decision to trim its capacity growth plans in the current year is also encouraging.

On the non-earnings front, Allegiant Travel Company grabbed headlines for a wrong reason. Shares of the carrier tanked following a news report aired on television, which questioned the safety standards on its flights. Currently, the allegations are being investigated by Kaplan Fox & Kilsheimer LLP.

Meanwhile, Southwest Airlines Co. invited the attention of regulators, after an engine on one of its planes (Boeing 737-700) exploded mid-air. To make matters worse, one of the passengers on that ill-fated flight expired.

JetBlue Airways Corporation also featured in the headlines by virtue of its bullish view on first-quarter unit revenues. The company was in the news due to labor-related issues as well. Flight attendants at this low-cost carrier voted in favor of joining the Transport Workers Union. By doing so, they have become the second labor group to be unionized at JetBlue. In 2014, the carrier’s pilots joined the Air Line Pilots Association.

On the price front, the NYSE ARCA Airline index increased 1.1% to $113.60 over the past five trading days.

Transportation - Airline Industry 5YR % Return

(Read the last Airline Stock Roundup for Apr 11, 2018).

Recap of the Past Week’s Most Important Stories

1. Delta’s first-quarter earnings (excluding 3 cents from non-recurring items) of 74 cents per share surpassed the Zacks Consensus Estimate by a penny. However, the bottom line contracted 3.9% on a year-over-year basis. High fuel costs led to the year-over-year decline. The winter storms, which led to multiple flight cancellations, have also hurt results in the reported quarter. Operating revenues came in at $9,968 million, outpacing the Zacks Consensus Estimate of $9,881.2 million. The top line increased 8.9% from the year-ago figure. Strong demand for air travel boosted revenues (Read more: Delta Q1 Earnings Top Estimates, Down Y/Y on High Costs).

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

2. United Continental’s earnings (excluding 2 cents from non-recurring items) of 50 cents surpassed the Zacks Consensus Estimate of 49 cents. Moreover, the bottom line climbed 25% year over year owing to higher revenues.

Operating revenues of $9,032 million in the first quarter were also ahead of the Zacks Consensus Estimate of $9,012.5 million. The top line increased 7.3% on a year-over-year basis. The company reported a 2.7% year-over-year rise in consolidated passenger revenue per available seat mile (PRASM: a key measure of unit revenues) to 13.15 cents. Yield increased 1.7% too.

Total operating expenses were up 8% year over year to $8,756 million. Consolidated unit cost or cost per available seat mile (CASM) — excluding fuel, third-party business expenses, profit sharing and special charges — nudged up 0.6% year over year. Average fuel price per gallon (on a consolidated basis) escalated 23.4% year over year to $2.11.

The company anticipates capacity to increase between 4% and 5% for the second quarter. Pre-tax margin is estimated to be between 9% and 11%. Passenger unit revenues are expected to increase 1-3% year over year in the same period.

For 2018, capacity is estimated to increase between 4.5% and 5.5%. Previously, the metric was projected to expand in the range of 4-6%. Meanwhile, CASM — excluding third-party business expenses, fuel & profit sharing — is expected in the range of down 1% to flat year over year. Effective income tax rate is estimated to be in the band of 21-22% in the year. The company also expects adjusted earnings per share to lie in the band of $7-$8. Earlier the metric was anticipated to lie between $6.50 and $8.50.

3 At JetBlue, March traffic — measured in revenue passenger miles (RPMs) — improved 7.3% year over year to 4.38 billion. On a year-over-year basis, consolidated capacity (or available seat miles/ASMs) also expanded 3.3% to 4.92 billion. With traffic growth outpacing capacity expansion, load factor (percentage of seats filled with passengers) registered a rise of 330 basis points year over year to 89%. JetBlue now expects first-quarter RASM to increase approximately 6.1% year over year (previous guidance anticipated the metric to grow in the 3.5-5.5% band) (Read more: Strong Demand Aids JetBlue's March Traffic, Bullish Q1 View).

4. CBS News' report, "60 Minutes", painted a gloomy picture of the Allegiant, alleging that it was facing a number of safety-related issues. The report further stated that the poor safety standard was responsible for around 100 serious mechanical incidents in the January 2016-October 2017 time frame (Read more: What's Behind the 3.1% Dip in Allegiant Travel Stock?).

5. According to data released by the Bureau of Labor Statistics, average airfares (adjusted) in March increased 0.6% on a month-on-month basis. Notably, this was the second successive month of air fare increase. However, unadjusted airfares declined 5.7% in the same month on a year-over-year basis. In fact, the August reading followed the 4.6% year-over-year decline in July.

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1 Stock of the Day pick for free.

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Southwest Airlines Co. (LUV) : Free Stock Analysis Report
 
JetBlue Airways Corporation (JBLU) : Free Stock Analysis Report
 
Delta Air Lines, Inc. (DAL) : Free Stock Analysis Report
 
United Continental Holdings, Inc. (UAL) : Free Stock Analysis Report
 
Allegiant Travel Company (ALGT) : Free Stock Analysis Report
 
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