A veteran airline analyst has lowered her sights for the industry, saying expectations have gotten too high at a time when margins are likely headed for a fall.

It's "time for a break" after a fourth quarter when airline shares gained 29% and airline multiples gained 37%, wrote Cowen & Co. analyst Helane Becker in a report issued Wednesday. The share price gains resulted not from expectations for higher earnings, but rather from perceptions that multiples should be higher, she noted.

Becker lowered her ratings on American (AAL) - Get Report, Air Canada (ACDVF) , Alaska (ALK) - Get Report , JetBlue (JBLU) - Get Report , Spirit(SAVE) - Get Report and United(UAL) - Get Report  to market perform from outperform.

She kept an outperform on Delta(DAL) - Get Report , naming it as her top pick. Deutsche Bank analyst Mike Linenberg recently said Delta was his favorite major airline pick.

In trading Wednesday, Delta shares rose 2.1% to $50.54.

Delta's gain led airline shares, which were all trading higher, after the carrier reported that  December passenger revenue per available seat mile (PRASM) was flat, "driven by strong demand trends and improving close-in domestic yields."

The results were better than expected, said Delta, which now expects fourth-quarter unit revenue to decline between 2.5% and 3%.

Linenberg wrote Tuesday that he projects the industry as a whole will also report a December PRASM decline between 2.5% and 3.5%.

Industry PRASM declined 4.5% in October and gained 0.2% in November.  The November number benefitted from a 2016 calendar that moved some Thanksgiving travel from December, "hence the deceleration in PRASM from November to December," Linenberg said.

Following Delta's traffic report, CFRA Research analyst Jim Corridore raised his price target for the carrier to $62 from $56.

Corridore maintained a strong buy on Delta. In a note, he said he expects its "positive unit revenue momenturm {will} help airline share prices and valuations."

Delta underperformed the industry in 2016 -- its shares fell 3% while United gained 27%, Southwest(LUV) - Get Report gained 16% and American gained 10%.

In a recent report, Gimme Credit analyst Vicki Bryan noted that among its peers Delta has "the keen advantage of having the highest profitability and best credit quality; it's also completed most of its major growth spending projects," she said.

"United and American are far behind Delta and they won't have the benefit of an expanding business environment," Bryan wrote.

While Linenberg recently cited Delta as his favorite major airline stock, he added,  "We like the domestics," naming Southwest, JetBlue, Spirit and Allegiant (ALGT) - Get Report .

Becker now has 10 airlines rated market perform and four rated outperform. Her 2017 top picks are Delta, followed by Southwest. 

Becker wrote Wednesday that investors remain focused on PRASM improvements, even though they are coming at a time when "margins are expected to compress due to higher jet fuel and labor costs."

PRASM measures revenue for each passenger flown one mile; it tends to rise as fuel prices rise. "The market has not cared about increased costs and focused only on improving unit revenue trajectory," Becker wrote. "We believe investors will look to rising costs in 2Q17 once unit revenue is on a positive path.

"The airline industry can continue to re-rate higher, but given the sharp move in multiples, the stocks will likely take a breather first," she said.

As for full-year 2017 PRASM, Becker estimates an increase of 0.7%, which would be a significant improvement over the 4.6% decline for the full year 2016. "The airlines will see margin compression in 2017 and we forecast adjusted net income will decline 20% during the year, with 1Q17 showing the largest y/y decline," she wrote.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.