U.S. Markets close in 4 hrs 11 mins

The Zacks Analyst Blog Highlights: Southwest Airlines, SkyWest, Allegiant Travel and American Airlines

Zacks Equity Research

For Immediate Release

Chicago, IL – November 03, 2016 – 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 Southwest Airlines (NYSE: LUV -Free Report ), SkyWest, Inc. (NASDAQ: SKYW -Free Report ), Allegiant Travel Company (NASDAQ: ALGT -Free Report ) and American Airlines Group (NASDAQ: AAL -Free Report ).

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: LUV, SKYW, ALGT

The past week saw low-cost carrier Southwest Airlines (NYSE: LUV -Free Report ) stock losing value despite reporting better-than-expected earnings as well as revenues in the third quarter. The stock suffered mainly due to its lackluster guidance with respect to revenue per available seat mile (RASM: a measure of unit revenues). The carrier expects the metric to fall in the band of 4–5% in the fourth quarter, which compares unfavorably to the views of its peers for unit revenues.

The past week also saw SkyWest, Inc. (NASDAQ: SKYW -Free Report ) and Allegiant Travel Company (NASDAQ: ALGT -Free Report ) reporting better-than-expected third-quarter results. On the non-earnings front, Airlines for America (‘A4A’), a leading trade group, predicted that 27.3 million passengers will opt for air travel in the upcoming Thanksgiving holiday period. The projection reflects a 2.5% increase from the 2015 figure. The International Air Transport Association (“IATA”) has issued a bullish long-term forecast with passenger demand predicted to nearly double in 2035 from the 2016 levels.

Transportation - Airline Industry Price Index

(Read the last Airline Stock Roundup for Oct 26, 2016 ).

Recap of the Past Week’s Most Important Stories

1. Southwest Airlines’ third-quarter 2016 earnings per share (on an adjusted basis) of 93 cents beat the Zacks Consensus Estimate of 88 cents. Moreover, the carrier’s revenues of $5,139 million edged past our expectation of $5,132 million. The adverse impact of rising labor costs on carriers’ bottom line can be clearly made out from Southwest Airlines’ cost per available seat mile (CASM) forecast. The carrier expects CASM – excluding special items and profit sharing – to increase in the band of 4–5% in the final quarter of 2016, which is much more than the 2.6% increase witnessed in the third quarter (Read more: Southwest Airlines Beats on Q3 Earnings & Revenues ).

The significance of labor deals was once again highlighted when the flight attendants of the low-cost carrier ratified the tentative pay-related deal inked last month. The contract becomes amendable on Nov 1, 2018.

2. St. George, UT-based SkyWest report impressive numbers for the third quarter of 2016. The carrier outperformed both in terms of earnings and revenues. The carrier’s earnings of 90 cents per share were well ahead of the Zacks Consensus Estimate of 81 cents. Earnings also improved approximately 26.8% from the year-ago figure. Quarterly revenues of $800 million comfortably beat the Zacks Consensus Estimate of $773 million and inched up approximately 1% on a year-over-year basis. Results were aided by lower operating costs due to fewer aircraft in service.

3. Allegiant Travel Company’s third-quarter 2016 earnings per share of $2.75 beat the Zacks Consensus Estimate by 9 cents. Quarterly revenues increased 11% year over year to $333 million and also surpassed the Zacks Consensus Estimate of $332 million. Air traffic rose 18.3% year over year due to a 20.2% rise in capacity, while load factor was 84.7% compared with 86.1% in the year-ago quarter. Average fuel expense declined 13.7% to $1.57 per gallon in the reported quarter.

For the fourth quarter of 2016, the company expects cost per available seat mile (CASM), excluding fuel, to grow in the range of 10–12%, primarily driven by the implementation of the new pilot agreement. The five-year deal became effective on Aug 1, 2016. Total revenue per available seat mile (TRASM) in the fourth quarter is likely to decline in the band of 5.5–7.5%.

4. According to a forecast by A4A, approximately 27.3 million passengers are expected to avail the services of U.S. airlines during the Thanksgiving holiday period this year, up 2.5% year over year. The forecast translates into 2.27 million fliers per day during the period (Nov 18–Nov 29), an increase of 55,000 from the comparable figure last year. Passenger volumes (on a daily basis) is projected to be in the range of 1.51 million to 2.81 million. The busiest day for the holiday period is expected to be Sunday, Nov 27. The lightest travel day is expected to be the Thanksgiving Day or Nov 24, 2016.

Cheap ticket prices are one of the main reasons behind the bullish forecast. According to the organization, air fares have fallen 5.6% on a year-over-year basis in the first nine months of the year. To meet the surge in demand, carriers are adding more seats (74,000 per day). In keeping with the rising demand, they intend to use either larger planes or introduce more flights.

5. The IATA issued a bullish long-term forecast regarding passenger travel, which is for the beleaguered airline industry. The association expects air travel to attract 7.2 billion passengers in 2035, almost double the 3.8 billion estimated for 2016. The Asia-Pacific region is expected to see the highest demand in air travel and is expected to be responsible for more than half the new passengers over the next two decades. The U.S. is expected to be dislodged from its position of top aviation market by China by 2024.

6. According to media reports, passengers at an American Airlines Group (NASDAQ: AAL -Free Report ) flight survived had a narrow escape as an engine failed just before the plane was to take off at Chicago's O'Hare International Airport. The engine caught fire and its debris apparently flew as far as half a mile from the scene of the mishap. The incident is being investigated by the National Transportation Safety Board.

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

About Zacks Equity Research

Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today.

About Zacks

Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978. The later formation of the Zacks Rank, a proprietary stock picking system; continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros.

Get the full Report on LUV - FREE

Get the full Report on SKYW - FREE

Get the full Report on ALGT - FREE

Get the full Report on AAL - FREE

Follow us on Twitter: https://twitter.com/zacksresearch

Join us on Facebook: https://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts

Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.

Media Contact
Zacks Investment Research

800-767-3771 ext. 9339



Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
SOUTHWEST AIR (LUV): Free Stock Analysis Report
SKYWEST INC (SKYW): Free Stock Analysis Report
ALLEGIANT TRAVL (ALGT): Free Stock Analysis Report
AMER AIRLINES (AAL): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research