Two Airline Stocks Ready for Takeoff

Copa Holdings and Hawaiian Holdings offer cheap shares and growing businesses.

Author:: Jake Lynch
Publish date:: Apr 21, 2010 5:00 AM EDT

BOSTON (TheStreet) -- The airline industry has lost $1.7 billion since ash clouds from a volcano in Iceland started clogging trans-Atlantic travel a week ago. Investors trying to ride this year's boom in airline stocks should look for companies that are unlikely to lose business.

Airline stocks have been climbing this year, with United Airlines' parent

UAL

( UAUA) soaring 69% and

US Airways

(LCC)

surging 45%. The companies below are rated "buy" at

TheStreet

and serve areas that haven't been affected by the volcano.

Here are reasons to consider buying shares:

The majority of analysts covering the stocks rate them "buy."
Their projected gains, based on median price targets, exceed 20% on average.
The stocks are significantly cheaper than those of other airlines.
At least five of the stocks' 10 largest shareholders expanded positions during the fourth quarter.

2. Copa Holdings

(CPA) - Get Report

offers passenger and cargo flights in Latin America through its main hubs in Colombia and Panama. During the past three years, Copa has increased revenue 14% annually, on average, and boosted net income 22% a year.

Quarter

: Fourth-quarter profit nearly quadrupled to $70 million, or $1.61 a share. Revenue declined 0.9% to $343 million. The operating margin narrowed to 22% from 24%. Copa has $352 million of cash and $846 million of debt, equaling a debt-to-equity ratio of 1.

Stock

: Copa has advanced 88% during the past year, outperforming U.S. indices. It sells for a price-to-projected-earnings ratio of 9.4 and a price-to-book ratio of 2.9, 64% and 74% discounts to peer averages. It's also cheap based on trailing earnings.

Consensus

: Of researchers following Copa, seven, or 78%, rate its stock "buy" and two rate it "hold."

Avondale Partners

expects it to hit $80, leaving a potential 39% return.

Citigroup

predicts the shares will gain 27% to $73.

Holders

: Six of Copa's 10 largest shareholders, including

Bank of America

(BAC) - Get Report

BlackRock

(BLK) - Get Report

and

Deutsche Bank

(DB) - Get Report

, increased positions during the fourth quarter. Two retained the size of their bets and two cut their holdings.

1. Hawaiian Holdings

(HA) - Get Report

owns Hawaiian Airlines, which provides passenger and cargo flights betweeen Honolulu and more than 10 cities on the U.S. mainland. During the past three years, the company has boosted revenue 10% annually, on average.

Quarter

: Hawaiian swung to a fourth-quarter profit of $35 million, or 66 cents, from a loss of $12 million, or 23 cents, a year earlier. Revenue declined 1.2%. The operating margin fell to 5.5% from 13%. It has $328 million of cash and $253 million of debt.

Stock

: Hawaiian has risen 51% during the past year, trailing the

S&P 500

. It trades at a price-to-projected-earnings ratio of 6.5 and a price-to-book ratio of 2.1, 75% and 82% discounts to peer averages. It's also cheap based on sales and cash flow.

Consensus

: Of analysts covering Hawaiian, five, or 83%, advise purchasing its shares and one recommends holding them. Avondale Partners expects the stock to more than double to $16.

Sidoti & Co.

predicts the shares will climb 49% to $11.

Holders

: Five of Hawaiian's 10 largest owners, including

Fidelity Investments

and

State Street

(STT) - Get Report

, increased their bets during the fourth quarter. Five, including

JPMorgan Chase

(JPM) - Get Report

, cut their holdings. Fidelity owns about 15% of the float.