NEW YORK (TheStreet) - Delta Air Lines (DAL - Get Report) kicked off the airline industry's quarterly earnings reports on Wednesday by posting a jump in profit for the three months ending in June, helped by significant fuel expense savings in the quarter. However, Delta and others are facing intense competition and lower demand, which is weighing on their ability to raise fares.

The rest of the airline group doesn't report until later in the month.

Deutsche Bank (DB) projects pre-tax profit for U.S. airlines of $6.3 billion compared to $5 billion a year ago with operating margins expanding 3.8 points to 17.6%, according to a July 12 note.

"Lower fuel expense accounts for more than double the improvement in operating and pretax profits," the note said.

"For that reason, we have seen investors ascribe lower valuations to fuel-driven earnings growth, particularly for major airlines which are bearing the brunt of the revenue declines," the Deutsche Bank note said. "We continue to favor domestic names, especially those with a self-help element underlying their investment thesis."

Delta Air Lines is a "buy" as per TheStreet Ratings. Here's five more airline stocks worth considering.

TheStreet Ratings, TheStreet's proprietary ratings tool, projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Based on 32 major data points, TheStreet Ratings uses a quantitative approach to rating over 4,300 stocks to predict return potential for the next year. The model is both objective, using elements such as volatility of past operating revenues, financial strength, and company cash flows, and subjective, including expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings.

Buying an S&P 500 stock that TheStreet Ratings rated a "buy" yielded a 16.56% return in 2014 beating the S&P 500 Total Return Index by 304 basis points. Buying a Russell 2000 stock that TheStreet Ratings rated a "buy" yielded a 9.5% return in 2014, beating the Russell 2000 index, including dividends reinvested, by 460 basis points last year.

Note: Year-to-date returns are based on July 14, 2015 closing prices.

 

ALGT Chart ALGT data by YCharts

1. Allegiant Travel Co. (ALGT - Get Report)
Market Cap: $3.3 billion
Rating: Buy, A-
Year-to-date return: 28.7%

Allegiant Travel Company, a leisure travel company, focuses on the provision of travel services and products to residents of under-served cities in the United States.

TheStreet said: "We rate ALLEGIANT TRAVEL CO (ALGT) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins, good cash flow from operations, notable return on equity and solid stock price performance. We feel its strengths outweigh the fact that the company is trading at a premium valuation based on our review of its current price compared to such things as earnings and book value."

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

  • ALGT's revenue growth has slightly outpaced the industry average of 3.0%. Since the same quarter one year prior, revenues slightly increased by 8.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • 47.11% is the gross profit margin for ALLEGIANT TRAVEL CO which we consider to be strong. It has increased significantly from the same period last year. Along with this, the net profit margin of 19.70% significantly outperformed against the industry average.
  • Net operating cash flow has significantly increased by 51.78% to $162.96 million when compared to the same quarter last year. Despite an increase in cash flow, ALLEGIANT TRAVEL CO's cash flow growth rate is still lower than the industry average growth rate of 74.13%.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. In comparison to other companies in the Airlines industry and the overall market on the basis of return on equity, ALLEGIANT TRAVEL CO has underperformed in comparison with the industry average, but has greatly exceeded that of the S&P 500.
  • Powered by its strong earnings growth of 101.07% and other important driving factors, this stock has surged by 54.82% over the past year, outperforming the rise in the S&P 500 Index during the same period. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.

 

 

LUV Chart LUV data by YCharts

2. Southwest Airlines Co. (LUV - Get Report)
Market Cap: $22.6 billion
Rating: Buy, A-
Year-to-date return: -20%

Southwest Airlines Co. operates passenger airlines that provide scheduled air transportation services in the United States and near-international markets. As of December 31, 2014, it operated 665 Boeing 737 aircraft; and had 12 Boeing 717 aircraft.

TheStreet said: "We rate SOUTHWEST AIRLINES (LUV) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth, solid stock price performance, largely solid financial position with reasonable debt levels by most measures and notable return on equity. We feel its strengths outweigh the fact that the company shows low profit margins."

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

  • LUV's revenue growth has slightly outpaced the industry average of 3.0%. Since the same quarter one year prior, revenues slightly increased by 6.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • 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 two years. We feel that this trend should continue. During the past fiscal year, SOUTHWEST AIRLINES increased its bottom line by earning $1.65 versus $1.06 in the prior year. This year, the market expects an improvement in earnings ($3.29 versus $1.65).
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • Net operating cash flow has increased to $1,452.00 million or 29.75% when compared to the same quarter last year. Despite an increase in cash flow, SOUTHWEST AIRLINES's cash flow growth rate is still lower than the industry average growth rate of 74.13%.
  • The current debt-to-equity ratio, 0.39, 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 0.57, displays a potential problem in covering short-term cash needs.

 

 

 

SAVE Chart SAVE data by YCharts

3. Spirit Airlines Inc. (SAVE - Get Report)
Market Cap: $4.6 billion
Rating: Buy, A-
Year-to-date return: -22.2%

Spirit Airlines, Inc. provides low-fare airline services. As of June 30, 2015, it operated approximately 360 daily flights to 57 destinations in the United States, Caribbean, and Latin America.

TheStreet said: "We rate SPIRIT AIRLINES INC (SAVE) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, impressive record of earnings per share growth, good cash flow from operations and notable return on equity. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself."

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

  • SAVE's revenue growth has slightly outpaced the industry average of 3.0%. Since the same quarter one year prior, revenues rose by 12.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The current debt-to-equity ratio, 0.32, is low and is below the industry average, implying that there has been successful management of debt levels. To add to this, SAVE has a quick ratio of 1.58, which demonstrates the ability of the company to cover short-term liquidity needs.
  • SPIRIT AIRLINES INC 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, SPIRIT AIRLINES INC increased its bottom line by earning $3.06 versus $2.43 in the prior year. This year, the market expects an improvement in earnings ($4.80 versus $3.06).
  • Net operating cash flow has significantly increased by 85.16% to $167.84 million when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 74.13%.
  • 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. Compared to other companies in the Airlines industry and the overall market on the basis of return on equity, SPIRIT AIRLINES INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.

 

 

 

JBLU Chart JBLU data by YCharts

4. JetBlue Airways Corp. (JBLU - Get Report)
Market Cap: $7 billion
Rating: Buy, A
Year-to-date return: 41.6%

JetBlue Airways Corporation, a passenger carrier company, provides air transportation services. As of December 31, 2014, the company operated a fleet of 13 Airbus A321 aircrafts, 130 Airbus A320 aircrafts, and 60 EMBRAER 190 aircrafts.

TheStreet said: "We rate JETBLUE AIRWAYS CORP (JBLU) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, impressive record of earnings per share growth, compelling growth in net income and attractive valuation levels. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook."

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

  • JBLU's revenue growth has slightly outpaced the industry average of 3.0%. Since the same quarter one year prior, revenues rose by 12.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Powered by its strong earnings growth of 3900.00% and other important driving factors, this stock has surged by 96.06% 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, JBLU should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • 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 $1.19 versus $0.51 in the prior year. This year, the market expects an improvement in earnings ($1.75 versus $1.19).
  • 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 3325.0% when compared to the same quarter one year prior, rising from $4.00 million to $137.00 million.

 

 

 

ALK Chart ALK data by YCharts

5.Alaska Air Group Inc. (ALK - Get Report)
Market Cap: $9.5 billion
Rating: Buy, A+
Year-to-date return: 23.2%

Alaska Air Group, Inc., through its subsidiaries, provides passengers and cargo air transportation services primarily in the United States. The company operates through Alaska Mainline and Alaska Regional segments.

TheStreet said: "We rate ALASKA AIR GROUP INC (ALK) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, impressive record of earnings per share growth, expanding profit margins and good cash flow from operations. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results."

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

  • ALK's revenue growth has slightly outpaced the industry average of 3.0%. Since the same quarter one year prior, revenues slightly increased by 3.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Powered by its strong earnings growth of 65.92% and other important driving factors, this stock has surged by 37.39% 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, ALK should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • ALASKA AIR GROUP INC 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, ALASKA AIR GROUP INC increased its bottom line by earning $4.43 versus $3.59 in the prior year. This year, the market expects an improvement in earnings ($5.95 versus $4.43).
  • 35.46% is the gross profit margin for ALASKA AIR GROUP INC which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 11.74% is above that of the industry average.
  • Net operating cash flow has significantly increased by 112.39% to $514.00 million when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 74.13%.