Why These Four Airlines are Cruising Lower on Wednesday

NEW YORK (TheStreet) -- United Continental (UAL), Southwest Airlines (LUV), Delta Air Lines (DAL) and JetBlue (JBLU) were cruising lower on Wednesday, putting a stopper on an industry rallying since the beginning of the year.

The likely culprit, oil prices jumped earlier in the day, a factor which will likely depress profitability among airlines. By late afternoon, West Texas Intermediate crude for delivery in February climbed 1.84% to $94.29 a barrel, while Brent crude was 0.68% higher to $107.11 a barrel.

Prices were higher after the U.S. Energy Administration reported crude supplies had dropped for the seventh week in a row. Since late November, crude-oil inventories have dropped around 41.2 million barrels. Also pushing prices higher, better-than-expected U.S. manufacturing data in the New York region indicated stronger demand for energy.

In Wednesday's afternoon session, United Continental dropped 1.1% to $46.24, Southwest was 1.5% lower to $21.10, JetBlue slipped 1.4% to $8.98, and Delta plunged 1.7% to $31.46.

TheStreet Ratings team rates DELTA AIR LINES INC as a Buy with a ratings score of B. The team has this to say about their recommendation:

"We rate DELTA AIR LINES INC (DAL) a BUY. This is driven by some important positives, 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 notable return on equity, good cash flow from operations, solid stock price performance, impressive record of earnings per share growth and revenue growth. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."

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

  • Compared to other companies in the Airlines industry and the overall market, DELTA AIR LINES INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly increased by 150.75% to $1,161.00 million when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 133.56%.
  • Powered by its strong earnings growth of 29.26% and other important driving factors, this stock has surged by 136.91% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, DAL should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • DELTA AIR LINES INC has improved earnings per share by 29.3% 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, DELTA AIR LINES INC increased its bottom line by earning $1.19 versus $1.00 in the prior year. This year, the market expects an improvement in earnings ($3.13 versus $1.19).
  • Despite its growing revenue, the company underperformed as compared with the industry average of 15.1%. Since the same quarter one year prior, revenues slightly increased by 5.7%. Growth in the company's revenue appears to have helped boost the earnings per share.

TheStreet Ratings team rates SOUTHWEST AIRLINES as a Buy with a ratings score of B. The team has this to say about their recommendation:

"We rate SOUTHWEST AIRLINES (LUV) a BUY. This is driven by some important positives, 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 impressive record of earnings per share growth, compelling growth in net income, revenue growth, largely solid financial position with reasonable debt levels by most measures and solid stock price performance. We feel these strengths outweigh the fact that the company shows weak operating cash flow."

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

  • SOUTHWEST AIRLINES 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 year. We feel that this trend should continue. During the past fiscal year, SOUTHWEST AIRLINES increased its bottom line by earning $0.56 versus $0.24 in the prior year. This year, the market expects an improvement in earnings ($1.06 versus $0.56).
  • 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 1518.8% when compared to the same quarter one year prior, rising from $16.00 million to $259.00 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 15.1%. Since the same quarter one year prior, revenues slightly increased by 5.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The current debt-to-equity ratio, 0.41, is low and is below the industry average, implying that there has been successful management of debt levels. Despite the fact that LUV's debt-to-equity ratio is low, the quick ratio, which is currently 0.68, displays a potential problem in covering short-term cash needs.
  • Powered by its strong earnings growth of 1750.00% and other important driving factors, this stock has surged by 88.72% 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.

TheStreet Ratings team rates JETBLUE AIRWAYS CORP as a Buy with a ratings score of B-. The team has this to say about their recommendation:

"We rate JETBLUE AIRWAYS CORP (JBLU) 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 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 $0.39 versus $0.28 in the prior year. This year, the market expects an improvement in earnings ($0.50 versus $0.39).
  • Despite its growing revenue, the company underperformed as compared with the industry average of 15.1%. 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 219.60% to $163.00 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 133.56%.
  • Powered by its strong earnings growth of 50.00% and other important driving factors, this stock has surged by 50.42% 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 $45.00 million to $71.00 million.

TheStreet Ratings team rates UNITED CONTINENTAL HLDGS INC as a Hold with a ratings score of C. The team has this to say about their recommendation:

"We rate UNITED CONTINENTAL HLDGS 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 70.82% 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 HLDGS 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 HLDGS INC swung to a loss, reporting -$2.32 versus $2.01 in the prior year. This year, the market expects an improvement in earnings ($2.42 versus -$2.32).
  • The gross profit margin for UNITED CONTINENTAL HLDGS INC is rather low; currently it is at 24.60%. 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.

More from Markets

Stocks Tumble as Trump Comments Lead to Worries Over China Trade Talks

Stocks Tumble as Trump Comments Lead to Worries Over China Trade Talks

Tiffany & Co. Sees a Strong Market in Asia

Tiffany & Co. Sees a Strong Market in Asia

Imagining the Stock Market in 10 Years

Imagining the Stock Market in 10 Years

Video: Jim Cramer on the Markets, Tiffany, Micron Technology and Union Pacific

Video: Jim Cramer on the Markets, Tiffany, Micron Technology and Union Pacific

Red Robin Slumps After Earnings Miss

Red Robin Slumps After Earnings Miss