2 airline stocks about to take off

Recent earnings reports have inspired a few well-deserved nods of accomplishment.

By Zacks.com Oct 22, 2013 3:29PM

File photo of at Spirit Airlines Airbus A319 aircraft arriving at Denver International Airport on May 3, 2012 (© Andy Cross/The Denver Post via Getty Images)By John Blank

It's nearly impossible to discuss any positive news about the airline industry without inadvertently invoking flight-related metaphors. Nevertheless, recent earnings reports have inspired quite a few well-deserved nods of accomplishment.

The Airline Transportation sector of the Zacks Industry Rank list gained 84 positions last week; with several new earnings reports beating expectations. This is a large category of 25 companies, which now holds a rank of #92 out of 260 sectors. This is a boost of +84 positions over just one week.

With positive earnings revisions outpacing negative 44 to 13, airlines are now averaging positive earnings per share (EPS) surprises of +27%.

There are a number of factors affecting this turnaround: reduced labor costs, increased consumer spending (dollar per mile), fewer flight cancellations, increased carrying capacity and the simple fact that people are just flying more this year compared to last. Combined, this means good news for an industry which has hurt more than most over the past decade.

Two of the carriers which stood out this week are turning these trends into revenue. With upgrades to a Zacks Rank #1 (Strong Buy) from a “Buy” rating or to a Zacks Rank #2, this may indicate a positive future performance for these stocks in response to further positive earnings estimate revisions.  Paying attention to sector performance, which affects not only individual businesses but the industry as a whole, is beneficial in developing a good investment strategy.

This industry seems to have departed its most turbulent years, with the tailwind of economic turnaround giving investors a first-class ticket to soaring profits. Just beware the overhead baggage of rising fuel costs which may delay earnings and lead investors to find the nearest exit row.  Metaphorically speaking, of course!

Spirit Airlines (SAVE)

SAVE was upgraded to a Zacks Rank #2 (Buy) last week from #3 (Neutral).  Its next expected earnings report is on October 30, 2013.

Spirit Airlines Inc. operates an airline based in Fort Lauderdale providing travel opportunity principally to and from South Florida, the Caribbean and Latin America. Spirit Airlines Inc. is based in Miramar, Florida. It is looking for +14% annual sales growth and +19% annual earnings growth next year.

This airline has strung together an impressive series of either meeting earnings expectations, or answering with a beat. It has had an earnings surprise of up +15% in the last three quarters.  According to the most accurate analyst, the coming quarterly report on October 30 looks to offer a +10% beat.

Republic Airway (RJET)

RJET is a Zacks Rank #1 (Strong Buy).  It moved up from a Zacks Rank #2 (Buy) last week. This company reports quarterly earnings on October 30, 2013.

Republic Airways Holdings, based in Indianapolis, Indiana, is an airline holding company that owns Chautauqua Airlines, Frontier Airlines, Republic Airlines and Shuttle America flights operated under partner brands, including American Eagle, Delta Connection, United Express and US Airways Express.

The airline currently employs approximately 10,000 aviation professionals. Republic Airways carried +7% more passengers in September than in the same period in 2012.  RJET’s most recent earnings surprise was +7%.

SPIRIT AIRLINES (SAVE): Free Stock Analysis Report (email required)
REPUBLIC AIRWAY (RJET): Free Stock Analysis Report (email required)

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Oct 23, 2013 10:42AM
Just buy and sell. Yesterday it was up. Today is profit taking day so it goes down.
Oct 23, 2013 10:26AM
Probably a good ride for several months.  However 1) too much competition; 2) elastic demand (success based solely on price of tickets and destinations).
Oct 23, 2013 2:18PM
The airline to watch that no one knows of is Volaris, which is a Mexican airline. They bring the best attributes of Southwest & JetBlue. They have posted some great numbers & are nearly single-handedly responsible for giving Mexican fliers decent fares. They fly to some US locations too.  
Jul 12, 2014 3:06PM
Glad they brought Frontier Airlines back.  This was the first airline I ever rode on, and it was a flight around the town of Farmington, NM when the then new airport opened up.  When I can, I always fly them as I enjoy the service and on-time arrivals and departures.  And the cost is reasonable too.
Oct 23, 2013 11:28AM
Speaking of airline stocks going up, I hope that little-known Baltia Airlines is about to advance nicely. I bought some shares last week below 2 cents. Baltia is in the advanced stages of obtaining their FAA certification. At the moment though, almost nobody has ever heard of them.
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