Barclays on U.S. Airlines: Economic Concerns Affect Revenue, but Fuel Declines Offset
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Up: 10 | Down: 12 | New: 19
Rating Summary:
19 Buy, 8 Hold, 0 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 10 | Down: 12 | New: 19
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Barclays on U.S. Airlines: Economic Concerns Affect Revenue, but Fuel Declines Offset
Barclays analyst said, "We do not expect potentially slower economic trends to materially impact airline earnings. Revenue is likely to respond to a potentially softer backdrop, but declining fuel prices have been a powerful offset. Given capacity discipline, we also believe the airlines could perform very well in an environment with moderate economic growth, if that moderate growth keeps fuel prices in check. We believe some of the recent sell-off has been a function of the market's desire to de-risk, but we believe the fundamental data points from the industry have been and will continue to be encouraging. In our view, the industry's effective adaptation to higher fuel punctuates the structural change that has developed within the industry. Ultimately, we expect valuations to rise to reflect that positive change."
"Potentially softer economic climate would likely affect industry revenue: Our
economists have recently revised their growth projections for the U.S. economy. As a result, we now model softer revenue outcomes for the remainder of the year and 2012."
"But estimates largely unaffected given fuel relief: Despite reduced revenue
expectations, the industry's earnings looking forward increase slightly as fuel prices have moderated substantially since our last revision."
Barclays maintains an Overweight on Allegiant Travel Co. (Nasdaq: ALGT), raises PT from $64 to $68 and raises FY11 EPS estimate from $2.40 to $2.60 and cuts FY12 from $4.40 to $4.35.
AMR Corp. (NYSE: AMR) (OW-rated), PT lowered from $16 to $15, FY11 EPS estimate lowered from -0.99 to -1.05 and FY12 raised from $0.95 to $1.05.
JetBlue Airways (Nasdaq: JBLU) (EW-rated), PT raised from $6 to $7, FY11 EPS estimate raised from $0.22 to $0.31 and FY12 from $0.30 to $0.42.
United Continental (NYSE: UAL) (OW-rated), PT raised from $41 to $43 and FY11 EPS estimate increased from $3.88 to $4.52 and FY12 from $6.75 to $7.10.
Alaska Air Group (NYSE: ALK)(EW-rated), PT $92, FY11 EPS estimate lowered from $7.10 to $7.04 and FY12 raised from $9.00 to $9.10.
Delta Air Lines (NYSE: DAL) (OW-rated), PT $16, FY11 EPS estimate lowered from $1.52 to $1.46 and FY12 increased from $2.35 to $2.45.
Southwest Airlines (NYSE: LUV)(EW-rated), PT $16, FY11 EPS estimate raised from $0.54 to $0.61 and FY12 from $0.85 to $0.95.
US Airways Group (NSE: LCC)(EW-rated), PT $15, FY11 EPS estimate lowered from $1.18 to $1.10 and FY12 increased from $2.05 to $2.15
Barclays analyst said, "We do not expect potentially slower economic trends to materially impact airline earnings. Revenue is likely to respond to a potentially softer backdrop, but declining fuel prices have been a powerful offset. Given capacity discipline, we also believe the airlines could perform very well in an environment with moderate economic growth, if that moderate growth keeps fuel prices in check. We believe some of the recent sell-off has been a function of the market's desire to de-risk, but we believe the fundamental data points from the industry have been and will continue to be encouraging. In our view, the industry's effective adaptation to higher fuel punctuates the structural change that has developed within the industry. Ultimately, we expect valuations to rise to reflect that positive change."
"Potentially softer economic climate would likely affect industry revenue: Our
economists have recently revised their growth projections for the U.S. economy. As a result, we now model softer revenue outcomes for the remainder of the year and 2012."
"But estimates largely unaffected given fuel relief: Despite reduced revenue
expectations, the industry's earnings looking forward increase slightly as fuel prices have moderated substantially since our last revision."
Barclays maintains an Overweight on Allegiant Travel Co. (Nasdaq: ALGT), raises PT from $64 to $68 and raises FY11 EPS estimate from $2.40 to $2.60 and cuts FY12 from $4.40 to $4.35.
AMR Corp. (NYSE: AMR) (OW-rated), PT lowered from $16 to $15, FY11 EPS estimate lowered from -0.99 to -1.05 and FY12 raised from $0.95 to $1.05.
JetBlue Airways (Nasdaq: JBLU) (EW-rated), PT raised from $6 to $7, FY11 EPS estimate raised from $0.22 to $0.31 and FY12 from $0.30 to $0.42.
United Continental (NYSE: UAL) (OW-rated), PT raised from $41 to $43 and FY11 EPS estimate increased from $3.88 to $4.52 and FY12 from $6.75 to $7.10.
Alaska Air Group (NYSE: ALK)(EW-rated), PT $92, FY11 EPS estimate lowered from $7.10 to $7.04 and FY12 raised from $9.00 to $9.10.
Delta Air Lines (NYSE: DAL) (OW-rated), PT $16, FY11 EPS estimate lowered from $1.52 to $1.46 and FY12 increased from $2.35 to $2.45.
Southwest Airlines (NYSE: LUV)(EW-rated), PT $16, FY11 EPS estimate raised from $0.54 to $0.61 and FY12 from $0.85 to $0.95.
US Airways Group (NSE: LCC)(EW-rated), PT $15, FY11 EPS estimate lowered from $1.18 to $1.10 and FY12 increased from $2.05 to $2.15
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