These Three Airline Stocks Soared Today

NEW YORK (TheStreet) -- Airline stocks rallied on the news AMR Corporation (AAMRQ) and US Airways' (LCC) proposed merger had been cleared for landing. The two airlines are required to divest 52 slot pairs at Washington Reagan National Airport and 17 slot pairs at New York LaGuardia Airport as part of the agreement, a major boon to airlines trying to gain a foothold on the East Coast.

Leading the gains, JetBlue (JBLU) soared 6.1% to $8.16, while United Continental (UAL) climbed 4.2% to $36.79 and SkyWest (SKYW) jumped 2% to $15.83.

The AMR-US Airways deal stalled after the U.S. Department of Justice leveled legislation on the grounds a merger would reduce competition, increase airfare prices and create a monopoly in the industry.

TheStreet Ratings team rates JetBlue Airways Corp as a Buy with a ratings score of B-. The team has this to say about its recommendation:

"We rate JetBlue Airways Corp (JBLU) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, revenue growth, good cash flow from operations, solid stock price performance and increase in net income. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • JetBlue Airways Corp reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, JetBlue Airways Corp increased its bottom line by earning 39 cents a share vs. 28 cents a share in the prior year. This year, the market expects an improvement in earnings (49 cents vs. 39 cents).
  • JBLU's revenue growth trails the industry average of 21.4%. Since the same quarter one year prior, revenues rose by 10.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • Net operating cash flow has significantly increased by 219.6% to $163 million when compared to the same quarter last year. In addition, JetBlue Airways Corp has also vastly surpassed the industry average cash flow growth rate of 107.88%.
  • Powered by its strong earnings growth of 50% and other important driving factors, this stock has surged by 44.14% over the past year, outperforming the rise in the S&P 500 Index during the same period. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Airlines industry average, but is greater than that of the S&P 500. The net income increased by 57.8% when compared to the same quarter one year prior, rising from $45 million to $71 million.

TheStreet Ratings team rates United Continental Holdings INC as a Hold with a ratings score of C. The team has this to say about its recommendation:

"We rate United Continental Holdings INC (UAL) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its solid stock price performance, compelling growth in net income and revenue growth. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk and poor profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Powered by its strong earnings growth of 4800.00% and other important driving factors, this stock has surged by 65.56% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Airlines industry. The net income increased by 6216.7% when compared to the same quarter one year prior, rising from $6.00 million to $379.00 million.
  • United Continental Holdings INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, United Continental Holdings INC swung to a loss, reporting -$2.32 a share vs. $2.01 a share in the prior year. This year, the market expects an improvement in earnings ($2.04 vs. -$2.32).
  • The gross profit margin for United Continental Holdings INC is rather low; currently it is at 24.6%. Regardless of UAL's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 3.70% trails the industry average.
  • Although UAL's debt-to-equity ratio of 6.98 is very high, it is currently less than that of the industry average. To add to this, UAL has a quick ratio of 0.59, this demonstrates the lack of ability of the company to cover short-term liquidity needs.

TheStreet Ratings team rates SkyWest Inc as a Buy with a ratings score of B-. The team has this to say about its recommendation:

"We rate SkyWest Inc (SKYW) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its solid stock price performance, impressive record of earnings per share growth, attractive valuation levels, notable return on equity and compelling growth in net income. We feel these strengths outweigh the fact that the company shows low profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 37.02% over the past year, a rise that has exceeded that of the S&P 500 Index. Turning to the future, naturally, any stock can fall in a major bear market. However, in almost any other environment, the stock should continue to move higher despite the fact that it has already enjoyed nice gains in the past year.
  • SkyWest Inc has improved earnings per share by 25% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. During the past fiscal year, SkyWest Inc turned its bottom line around by earning 99 cents a share vs. -53 cents a share in the prior year. This year, the market expects an improvement in earnings ($1.28 a share vs. 99 cents a share).
  • SKYW, with its decline in revenue, underperformed when compared the industry average of 21.4%. Since the same quarter one year prior, revenues slightly dropped by 1.7%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. In comparison to the other companies in the Airlines industry and the overall market, SkyWest Inc's return on equity is significantly below that of the industry average and is below that of the S&P 500.

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