Baker reduced estimates and price targets because he expects industry operating margins, which improved close to two points in the first half of the year, to around half a point.
Baker projected year-end share prices of $17.50 for Delta, his top pick, which closed Tuesday at $9.65; $19 for US Airways, which closed at $11.46; $38 for United, which closed at $18.89; $10 for JetBlue (JBLU), which closed at $5.51; $39.50 for Alaska (ALK), which closed at $34.85, and $12.50 for Southwest (LUV - Get Report), which closed at $9.19.
Wolfe Trahan analyst Hunter Keay has a $27 price target for United, and CRT Capital Group analyst Mike Derchin wrote Wednesday that he remains positive on the industry, particularly Delta and United, despite all the concerns. He said the industry generated an estimated $2 billion in second quarter profits despite rising fuel costs.
"Industry fundamentals are continuing to improve yet expectations are very low," Derchin wrote. "Demand is solid. Fares/yields are up. Load factors are at record levels. Ancillary fees are growing. Capacity discipline remains in force."In the current quarter, Derchin estimatesd Delta PRASM will rise 4%, industry PRASM will rise 2% and United PRASM will be flat. >To follow the writer on Twitter, go to http://twitter.com/tedreednc. >To contact the writer of this article, click here: Ted Reed