Analyst Mike Linenberg predicted 2015 industry profits of $16.5 billion, up from this year's record of $12.4 billion, based on lower fuel prices, lower interest expense and modest non-fuel cost increases.
Must Read: American Air is Rated Top 2015 Airline Pick by JP Morgan as Oil Prices Fall
In a report issued Monday, Linenberg raised EPS estimates and 12-month price targets for eight airlines. "Among the large market cap names we favor UAL," he wrote, raising his target price for United to $80 from $50.
United shares closed Friday at $64.10, up 69% year to date.
Linenberg said his favorite small-cap name is JetBlue (JBLU) . He raised his target price to $21 from $17. The only reason Linenberg did not raise his price target for Delta (DAL) is because he raised it last week to $60 from $48.
JetBlue closed Friday at $14.81, up 73% year-to-date. Delta closed Friday at $47.68, up 74% year-to-date.
Linenberg's rationale is that major airline stocks are currently trading at 10.7 times his projected 2015 EPS and their enterprise values are trading at 5.5 times projected 2015 EBITDAR. "Given that airline shares have historically traded 10x - 12x on a forward P/E basis and 5x - 7x EBITDAR, we view the current trading levels as an attractive entry point," he wrote.