Market Insights: Airline Stocks are Expecting Things to Soar in Coming Quarters

Tom Gentile

Posted in
Current Events

By: Tom Gentile
April 20th, 2022

4 mins read

What headline concerning doesn’t have some feeble attempt at a pun by using the word ‘soar’ or ‘soaring’ right?

But that is what airline stock CEO’s are kind of forecasting when they speak of their companies outlook in the coming quarters which will take us through the summer.

Many airline stocks have reported their 1st quarter earnings and revenues and though they reported what they did, what seems to be carrying the day for these stocks and a big reason for their price increases as of late is their forward-looking views on earnings, revenue, and the demand they are expecting going forward.

Airline Stock Earnings

Delta Air Lines (NYSE: DAL) reported 1st Quarter earnings April 13. They reported loss of $1.23 per share on revenue of $9.3 billion. Some estimates were for them to suffer an even greater loss where the website had them expected to lose less than that.

They stated their revenue expectations for the 2nd quarter to come in higher than current estimates.

Alaska Air Group (NYSE: ALK) reported a 1st Quarter loss of $1.33 per share on revenue of $1.7 billion where the estimates were for a loss greater than that. I believe the consensus estimate was for a loss of $1.58 per share.

American Airlines  (NYSE: AAL) reported a 1st Quarter loss of $2.32 per share on revenue of $8.9 billion. Consensus estimates was an expected loss of $2.43 per share.

One more? How about United Airlines Holdings, (NYSE: UAL).

They reported a 1st Quarter loss of $4.24 per share on revenue of $7.6 billion. The consensus estimate was a loss of $4.19 per share, but the site had expectations for a loss of $3.90 per share (so a beat on that sites expectations).

Airlines Share Common Expectation Going Forward

Despite the earnings numbers coming in all at a loss, the thing to notice is for the most part they did not lose AS MUCH as some groups expected and that, if you haven’t experienced this prior, has the effect of gaining investor confidence as the perception of things NOT being as bad as expected is what plays out.

Earnings and Revenue what they are for the first quarter many of these companies are talking about expectations of earnings and revenue increasing in the second quarter. In the case of UAL, they said they expect to get back to profitability in 2022.

Optimism from the Airlines

If you listen to or read reports of what these company CEO’s are saying you will find they expect increased demand and that through the summer months expect jam-packed flights.

 A detail that may also help these stocks is the announcement made on April 18, the Transportation Security Administration would no longer enforce the federal mask mandate.

This could lead to more people being more willing to fly and that could mean the expectations of jam-packed flights coming to fruition.

A Couple of Concern for Airlines

All this good news, feel good talk from the airlines and optimism going forward aside the airlines still have to deal with the high cost and potential rising cost of fuel.

The anticipation from the airlines and analyst of airlines is that the increased amount of passengers will offset this concern and they will still see increased profitability.

Another concern is the possibility of the economy going in to a recession. The Fes is battling to keep control inflation, which is at 40-year highs and in doing so have forecasted more aggressive rate hikes and by more aggressive we are talking about 50-basis point hikes vs a 35-basis point hike.

The next hike is expected in May and there are some saying they see this one and 6 more to come.

Wrap Up

If you feel the hawkish Fed, Russia Ukraine, the possibility of new COVID variants, neither of which I gave any dialogue to are enough of a concern to offset the airline stocks themselves optimism maybe you don’t invest or even trade.

If you feel that those other factors may happen, but you believe in the airlines as the companies themselves do then it might be tome to start looking at technical setups and try to find bullish options trading opportunities.

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