United Will Lose Money, so Buy the Stock: Analyst
Airline share performance so far this year has been mixed, with double-digit gains by three legacy carriers and declines by domestically focused carriers Alaska, JetBlue (JBLU) and Southwest.
US Airways (LCC) leads the sector with a 50% gain, partially due to strong performance and partially to merger chatter. Because a merger with bankrupt AMR (AAMRQ.PK) would likely lead to further capacity declines, Wall Street is increasingly supportive.
Linenberg considers 2011 to have been "a watershed year" for airlines because they prospered despite sub-2% GDP growth and a 40% increase in fuel costs."As such, we remain favorably disposed to the names that we believe are most leveraged to an industry that appears to be undergoing a secular change," he wrote, naming Delta, United and US Airways, as well as low-fare, low-cost carrier Spirit (SAVE). Overall, he estimated the industry will report net a net loss of $815 million, $100 million better than a year ago despite higher fuel costs, in what is typically its weakest quarter. Meanwhile, Maxim Group analyst Ray Neidl wrote, in a recent report, that he estimates the industry will have a small first-quarter loss preceding strong full-year results. 9 Stocks That Prove Dividends Make All the Difference "The U.S. industry is probably in the strongest position that it has been since deregulation due to three key factors which include industry consolidation, cost/capacity discipline, and the development of ancillary revenues from add-on fees," Neidl wrote. "The key remaining challenge for the legacy airlines is improvement of the balance sheets which would enable the market to value the legacy airlines at a higher multiple." -- Written by Ted Reed in Charlotte >To contact the writer of this article, click here: Ted Reed >To follow the writer on Twitter, go to http://twitter.com/tedreednc.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV