As last year drew to a close, I reviewed the stock of Alaska Air Group, (NYSE: ALK ) , and determined that it had room to climb in 2014. So far, so good; through the first quarter of this year, the stock has gained roughly 29%. Is the Seattle-based airline, one of the most efficient U.S. major carriers, getting ahead of itself?
The short answer to this question would appear to be no. While 29% is a precocious gain for just a handful of months, and though I'd love to take credit for a brilliant stock pick, the Dow Jones U.S. Airlines Index, which posted a brute gain of 86% last year, is up another 28% year to date.�It's entirely possible that Alaska Airlines is getting bid up in the larger demand for airline stocks. Let's peel the aviation onion back a bit to get a closer read on Alaska's prospects for the rest of this year.
Earnings and valuation continue to look attractive
Alaska Airlines continues to impress investors with each earnings report. In its most recent filing for Q4 2013, the company reported record earnings of $78 million, a 68% increase over the prior year's quarter. The positive earnings were driven primarily by a 7% increase in revenue. When a company can increase earnings so significantly, it can offset a rise in the stock in terms of relative valuation, and we see this phenomenon at work with Alaska Airlines. When we reviewed the company's stock in November, ALK traded at 11.3 times trailing 12-month earnings. Since then, even after its price appreciation of more than one-fourth of its value, the airline's P/E ratio has remained in the same ballpark, at 13.0. This compares favorably to the peer group we previously compared ALK to. Currently, Southwest Airlines (NYSE: LUV ) trades at 22.5 trailing 12-month earnings, and the P/E ratios of the rest of the group are as follows:�Spirit Airlines�-- 25.3,�Republic Airways Holdings�-- 19.1, and�JetBlue Airways (NASDAQ: JBLU ) -- 17.6. Thus, relative to its competitors, Alaska still looks cheap.
Qantas Airways Limited is engaged in the operation of international and domestic air transportation services, the provision of freight services and the operation of a Frequent Flyer loyalty program. The Company�� main business is the transportation of customers using two complementary airline brands: Qantas and Jetstar. It also operates subsidiary businesses, including other airlines, and businesses in specialist markets, such as Q Catering. The Company operates in four segments: Qantas Domestic, Qantas International, Qantas Loyalty and Qantas Freight. Qantas Domestic includes Australian domestic passenger flying business of Qantas Brands. Qantas International includes the International passenger flying business of Qantas Brands. Qantas Loyalty Operates the Qantas customer loyalty program. In April 2014, Qantas Airways Ltd announced that Westpac Banking Corporation and its associated companies ceased to be a substantial share holder of the Company.
Advisors' Opinion: - [By MARKETWATCH]
LOS ANGELES (MarketWatch) -- Stocks in Australia fell early Thursday, pressured by a drop in the country's currency to a three-month low below 90 U.S. cents, and by losses on Wall Street overnight on concerns about tapering of monetary stimulus. The S&P/ASX 200 (AU:XJO) fell 28 points, or 0.5%, to 5,246, led by losses in the heavily weighted financial sector. There, shares of Westpac Banking Corp. (AU:WBC) (WEBNF) lost 1.2%, National Australia Bank Ltd. (AU:NAB) (NAUBF) declined 1%, and Australia & New Zealand Banking Group (AU:ANZ) (ANEWF) shed 0.7%. Shares of Qantas Airways Ltd. (AU:QAN) (QUBSF) sank 14% after the company warned it expects to post an underlying loss before tax of $250 million to $300 million for the six months ending Dec. 31. The carrier said trading conditions saw a marked deterioration, particularly in November with both passenger loads and yields "below the already negative trends for the year to date."
- [By MARKETWATCH]
LOS ANGELES (MarketWatch) -- Australian stocks lost hold of early gains Monday. Retailer shares traded mostly weaker, but an advance for miners limited the losses after many base-metals futures rose on the back of better-than-expected U.S. jobs data. The S&P/ASX 200 (AU:XJO) slipped 0.1% to 5,182.40 after opening higher. In early moves, Myer Holdings Ltd. (AU:MYR) fell 0.7%, David Jones Ltd. (AU:DJS) (DVDJF) lost 1.1%, and Harvey Norman Holdings Ltd. (AU:HVN) (HNORY) traded 1% lower. In the mining space, BHP Billiton Ltd. (AU:BHP) (BHP) added 0.5%, Rio Tinto Ltd. (AU:RIO) (RIO) rose 0.7%, Alumina Ltd. (AU:AWC) (AWCMF) improved by 1%, and Oz Minerals Ltd. (AU:OZL) (OZMLF) jumped 2.2%. Shares of Qantas Airways Ltd. (AU:QAN) (QUBSF) rose briefly but then moved the flat line, holding firm after sharp losses last week. Chris Bowen, who serves as the Labor Party's shadow treasurer, said the struggling airline was "effectively" too big to fail. Meanwhile, shares of QBE Insurance Group Ltd. (AU:QBE)
Best Airline Stocks For 2014: Copa Holdings SA (CPA)
Copa Holdings, S.A. (Copa Holdings), incorporated on May 06, 1998, is a Latin American provider of airline passenger and cargo service through its two principal operating subsidiaries, Copa Airlines and Copa Colombia. Copa Airlines operates from its position in the Republic of Panama, and Copa Colombia provides service within Colombia and international flights from various cities in Colombia to Panama, Venezuela, Ecuador, Mexico, Cuba, Guatemala and Costa Rica, complemented with service within Colombia. As of December 31, 2012, the Company operated a fleet of 83 aircraft with an average age of 5.13 years; consisting of 57 modern Boeing 737-Next Generation aircraft and 26 Embraer 190 aircraft. . As of December 31, 2012, the Company offers approximately 334 daily scheduled flights among 64 destinations in 29 countries in North, Central and South America and the Caribbean, mainly from its Panama City Hub.
Copa provides passengers with access to flights to more than 150 other destinations through codeshare arrangements with UAL pursuant to which each airline places its name and flight designation code on the other�� flights. As of December 31, 2012, Copa had firm orders, including purchase and lease commitments, for 35 additional Boeing 737-Next Generation aircraft. Copa also has options for an additional 14 Boeing 737-Next Generation aircraft.
The Company competes with Avianca-Taca, American Airlines, Delta Air Lines, American Airlines and LAN Group.
Advisors' Opinion: - [By Will Ashworth]
I don�� know what�� going to happen in six months, let alone 20 years. However, I do know that OLED plays in a very exciting space, and Discovery Capital still seems to agree. Financially, OLED stock is solid, and if things go the company’s way in the coming years, it should get big in a hurry.
Best Stocks #3 (Midcap): Copa Holdings (CPA)
I�� a big believer in Latin America. While it has its troubles like every other emerging market, I continue to view its growing middle class with envy. While our middle class is being hallowed out, Latin America�� is growing exponentially. The U.S. was never more secure economically than when its middle class was growing, so history has demonstrated what this can do for a country.
- [By Asit Sharma]
The airline industry has a singular talent for draining the pockets of well-intentioned investors. Highly leveraged balance sheets and bankruptcies are the norm. Significant labor costs and unpredictable jet fuel prices wreak havoc on variable costs. Yet some airlines generate solid returns quarter after quarter. Alaska Air Group (NYSE: ALK ) , Ryanair (NASDAQ: RYAAY ) , Southwest Airlines (NYSE: LUV ) , and Copa Holdings (NYSE: CPA ) each manage to be consistently profitable. Let's examine a few themes they share in common, and zero in on their individual strategic ideas.
- [By Jayson Derrick]
Analysts at JPMorgan maintained an Overweight rating on Copa Holdings (NYSE: CPA) with a price target raised to $168 from a previous $163. Shares lost 0.25 percent, closing at $125.38.
Best Airline Stocks For 2014: Delta Air Lines Inc (DAL)
Delta Air Lines, Inc. (Delta) provides scheduled air transportation for passengers and cargo throughout the United States and around the world. The Company�� route network gives it a presence in every domestic and international market. Delta�� route network is centered around the hub system it operate at airports in Amsterdam, Atlanta, Cincinnati, Detroit, Memphis, Minneapolis-St. Paul, New York-JFK, Paris-Charles de Gaulle, Salt Lake City and Tokyo-Narita. Each of these hub operations includes flights that gather and distribute traffic from markets in the geographic region surrounding the hub to domestic and international cities and to other hubs. The Company�� network is supported by a fleet of aircraft that is varied in terms of size and capabilities.
Delta has bilateral and multilateral marketing alliances with foreign airlines to improve its access to international markets. These arrangements can include code-sharing, reciprocal frequent flyer program benefits, shared or reciprocal access to passenger lounges, joint promotions, common use of airport gates and ticket counters, ticket office co-location, and other marketing agreements. Its international code-sharing agreements enable it to market and sell seats to an expanded number of international destinations. The Company has international codeshare arrangements with Aeromexico, Air France, Air Nigeria, Alitalia, Aeroflot, China Airlines, China Eastern, China Southern, CSA Czech Airlines, KLM Royal Dutch Airlines, Korean Air, Olympic Air, Royal Air Maroc, VRG Linhas Aereas (operating as GOL), Vietnam Airlines, Virgin Australia and WestJet Airlines.
In addition to the Company�� marketing alliance agreements with individual foreign airlines, it is a member of the SkyTeam airline alliance. Delta also has frequent flyer and reciprocal lounge agreements with Hawaiian Airlines, and codesharing agreements with American Eagle Airlines (American Eagle) and Hawaiian Airlines. It has air service agreements with multiple do! mestic regional air carriers that feed traffic to its route system by serving passengers primarily in small-and medium-sized cities.
Through the Company�� regional carrier program, it has contractual arrangements with 10 regional carriers to operate regional jet and, in certain cases, turbo-prop aircraft using its DL designator code. In addition to Delta�� wholly owned subsidiary, Comair, it has contractual arrangements with ExpressJet Airlines, Inc. and SkyWest Airlines, Inc., both subsidiaries of SkyWest, Inc.; Chautauqua Airlines, Inc. and Shuttle America Corporation, both subsidiaries of Republic Airways Holdings, Inc.; Pinnacle Airlines, Inc. and Mesaba Aviation, Inc. (Mesaba), both subsidiaries of Pinnacle Airlines Corp. (Pinnacle); Compass Airlines, Inc. (Compass) and GoJet Airlines, LLC, both subsidiaries of Trans States Holdings, Inc. (Trans States), and American Eagle.
The Company�� SkyMiles program allows program members to earn mileage for travel awards by flying on Delta, Delta�� regional carriers and other participating airlines. Mileage credit may also be earned by using certain services offered by program participants, such as credit card companies, hotels and car rental agencies. In addition, individuals and companies may purchase mileage credits. The Company reserves the right to terminate the program with six months advance notice, and to change the program�� terms and conditions at any time without notice.
SkyMiles program mileage credits can be redeemed for air travel on Delta and participating airlines, for membership in the Company�� Delta Sky Clubs and for other program participant awards. Mileage credits are subject to certain transfer restrictions and travel awards are subject to capacity controlled seating. During the year ended December 31, 2011, program members redeemed more than 275 billion miles in the SkyMiles program for more than 12 million award redemptions. During 2011, 8.2% of revenue miles flown on Delta were from a! ward trav! el.
The Company generates cargo revenues in domestic and international markets through the use of cargo space on regularly scheduled passenger aircraft. Delta is a member of SkyTeam Cargo, an airline cargo alliance. SkyTeam Cargo offers a network spanning six continents and provides customers an international product line.
The Company has several other businesses arising from its airline operations, including aircraft maintenance, repair and overhaul (MRO); staffing services for third parties; vacation wholesale operations, and its private jet operations. Delta�� MRO operation, known as Delta TechOps, is an airline MRO in North America. In addition to providing maintenance and engineering support for its fleet of approximately 775 aircraft, Delta TechOps serves more than 150 aviation and airline customers. Its staffing services business, Delta Global Services, provides staffing services, professional security, training services and aviation solutions to approximately 150 customers. The Company�� vacation wholesale business, MLT Vacations, is the provider of vacation packages in the United States. Its private jet operations, Delta Private Jets, provides aircraft charters, aircraft management and programs allowing members to purchase flight time by the hour.
The Company competes with SkyTeam, United Air Lines, Continental Airlines, Lufthansa German Airlines, Air Canada, American Airlines, British Airways and Qantas.
Advisors' Opinion: - [By Adam Levine-Weinberg]
Growing profitably
JetBlue is already one of the largest carriers in the New York area, where it competes heavily with Delta Air Lines (NYSE: DAL ) , United Continental (NYSE: UAL ) , and AMR's American Airlines. However, the company has been diversifying its operations, and has become the largest carrier in Boston and San Juan. JetBlue's growth is primarily concentrated in those two markets now.
- [By Ben Levisohn]
Today, however, the airline industry got some good news that had nothing to do with that litigation: Delta Air Lines�(DAL) is set to join the Standard & Poor’s 500-stock index. Now, we all know that an addition to the index is not meant to be a recommendation, but with index funds and index huggers, alike, being forced to buy its shares, Delta’s stock has surged today.
- [By Adam Levine-Weinberg]
Spirit Airlines (NASDAQ: SAVE ) stock rocketed higher by more than 153% in 2013. This made it the biggest gainer in one of the top-performing industry sectors this year, outshining strong performances from Delta Air Lines (NYSE: DAL ) and Southwest Airlines (NYSE: LUV ) .
- [By Monica Gerson]
Delta Air Lines (NYSE: DAL) is estimated to report its Q4 earnings at $0.63 per share on revenue of $9.03 billion.
Forest Laboratories (NYSE: FRX) is projected to report its Q3 earnings at $0.03 per share on revenue of $827.25 million.
Best Airline Stocks For 2014: Alaska Air Group Inc. (ALK)
Alaska Air Group, Inc., through its subsidiaries, Alaska Airlines, Inc. and Horizon Air Industries, Inc., operates as an airline company serving destinations in the western United States, Canada, and Mexico. The company provides passenger air services; and freight and mail services primarily to and within the state of Alaska and on the West Coast. As of December 31, 2009, it operated a fleet of 110 jet aircraft; and Horizon Air Industries operated a fleet of 18 jets and 40 turboprop aircraft. The company was founded in 1932 and is based in Seattle, Washington.
Advisors' Opinion: - [By Asit Sharma]
As last year drew to a close, I reviewed the stock of Alaska Air Group, (NYSE: ALK ) , and determined that it had room to climb in 2014. So far, so good; through the first quarter of this year, the stock has gained roughly 29%. Is the Seattle-based airline, one of the most efficient U.S. major carriers, getting ahead of itself?
Best Airline Stocks For 2014: Air France KLM SA (AFLYY.PK)
Air France-KLM SA (Air France-KLM), incorporated on April 23, 1947, is an airline engaged in the business of passenger transportation. It has four segments: Passenger, Cargo, Maintenance and Other. The Company�� primary business is to hold direct or indirect interests in the capital of air transport companies and, more generally, in any companies in France or elsewhere whose purpose is related to the air transport business. Air France-KLM activities also include cargo, aeronautics maintenance and other air-transport related activities including, principally, catering and charter services. At March 31, 2011, the Air France-KLM group fleet consists of 609 aircraft, of which 593 were operational. At March 31, 2011, 274 aircraft were fully owned (45% of the fleet), 117 aircraft were under finance lease representing 19% of the fleet and 218 under operating lease representing 36% of the fleet.
Passenger
Passenger operating revenues primarily come from passenger transportation services on scheduled flights with the Company�� airline code, including flights operated by other airlines under code-sharing agreements. They also include commissions paid by SkyTeam alliance partners, code-sharing revenues, revenues from excess baggage and airport services supplied by the Company�� to third party airlines and services linked to information technology (IT) systems.
Cargo
Cargo operating revenues come from freight transport on flights under the companies��codes, including flights operated by other partner airlines under code-sharing agreements. Other cargo revenues are derived principally from sales of cargo capacity to third parties. During the fiscal year ended March 31, 2011, the Company transported more than 1.5 million tons of cargo, of which 66% in the bellies of passenger aircraft and 33% in the cargo fleet, to a network of approximately 254 destinations in approximately 111 countries. Air France-KLM Cargo has a product range organized around four prod! uct families, Equation, Cohesion, Variation and Dimension.
Maintenance
Maintenance operating revenues are generated through maintenance services provided to other airlines and customers globally. The Company�� two engine shops are located in Amsterdam and Paris. CFM56 engine shops support the fleet of CFM56-5 power plants in the world, with nearly 400 engines operated by numerous airlines. CF6-80E1 provides full-service maintenance. KLM Engineering & Maintenance (AFI KLM E&M) provides an alternative to the manufacturer�� services in terms of overhaul and services on this engine with its offering supported by technological infrastructure.
Other
The revenues from this segment come primarily from catering supplied by the Company to third-party airlines and to charter flights operated primarily by Transavia. The catering business is regrouped around Servair, an Air France subsidiary which generates more than 90% of the revenues of this activity, and KLM Catering Services, a subsidiary of KLM.
Advisors' Opinion: - [By El Torero]
The airline will undoubtedly pounce on the likely failings of rival companies, though this is also an area where easyJet will be eager to move in. Spanair is gone as is Malev Zrt, two former Ryanair rivals. Air France-KLM (AFLYY.PK) and Iberia are in trouble, among other European airlines. Ryanair will take advantage of such weaknesses in its aim of becoming Europe's out-and-out dominant short-haul carrier. As other airlines cut routes, airports are now looking to Ryanair to take up the newly available airport space. As a result of this, with "opportunities opening up in Germany, Scandinavia and Central Europe" in particular, Ryanair's deputy chief executive, Howard Millar sees the Irish company increase its market share from 15 percent to 20 percent before the end of the decade.
Best Airline Stocks For 2014: JetBlue Airways Corporation(JBLU)
JetBlue Airways Corporation provides passenger air transportation services in the United States. As of December 31, 2011, it operated approximately 700 daily flights to 70 destinations in 22 states, Puerto Rico, and Mexico; and 12 countries in the Caribbean and Latin America through a fleet of 120 Airbus A320 aircraft and 49 EMBRAER 190 aircraft. The company, through its subsidiary, LiveTV, LLC, provides in-flight entertainment, voice communication, and data connectivity systems and services for commercial and general aviation aircraft, including live in-seat satellite television, digital satellite radio, wireless aircraft data link service, and cabin surveillance systems. JetBlue Airways Corporation was founded in 1998 and is based in Forest Hills, New York.
Advisors' Opinion: - [By Ben Levisohn]
Wolfe Research’s Hunter Keay and Jared Shojaian think United Continental (UAL) and JetBlue (JBLU) should swap planes. They explain:
Getty Images We believe both�United Continental and JetBlue have fleet inefficiencies that contribute to poor margins for both airlines. If�United Continental acquired JetBlue�� 60 E-190s (and the 24 on order), in a transaction like the one Delta Air Lines (DAL) and�Southwest Airlines (LUV) announced in 2012 when Southwest Airlines agreed to sublease its 88 B717s to Delta Air Lines, we believe both companies would benefit. This would also represent no incremental capacity to United Continental, by our math…
- [By Dan Caplinger]
Southwest has also stood up to low-cost competitor JetBlue (NASDAQ: JBLU ) by coming to an agreement with DISH Network to offer free live television access as well as on-demand shows at no charge. Rather than installing monitors, Southwest will make the entertainment freely available on its Wi-Fi planes, not even charging for Wi-Fi access for passengers who want only to watch the DISH offerings.
- [By Adam Levine-Weinberg]
Many of these airports are slot-controlled, meaning the government has capped the number of flights that airlines are permitted to schedule, To mitigate delays. These slots are highly sought after. For example, JetBlue Airways (NASDAQ: JBLU ) bid $40 million for eight slot-pairs (the rights to operate eight round trips) at Reagan National Airport in late 2011. On peak days, airlines will use every single slot that they own at these popular airports.
