Barclays on U.S. Airlines: Oil Still Neither Boom Nor Bust; Cutting PT/Estimates on Several Stocks

Barclays on U.S. Airlines: Oil Still Neither Boom Nor Bust

Analyst, David E. Fintzen, notes that the rise in oil prices have had a negative affect on airline shares, but there is evidence that the sector is better managed to handle the impact today. However, the relationship between higher fuel and revenue trends is still holding and could create RASM weakness into the new year. A solid September had put some fix on the hole, but Fintzen reduces estimates on several companies, fearing the issue is not contained.

Fintzen said, "With expectations being lowered by higher energy, we think the risk-reward in the group has shifted for the better. Our top picks among our Overweight stocks remain LUV and DAL, but also both the smaller LFCs (ALGT and SAVE). We remain relatively cautious on UAL with an Equal Weight rating and continue to see the least-favorable risk-reward in the group in Underweight ALK."

For UW-rated Alaska Air (NYSE: ALK), Price target lowered by $1 to $37, FY12 EPS estimate lowered from $4.75 to $4.41 and FY13 from $5.40 to $5.00.

For OW-rated Allegiant Travel (Nasdaq: ALGT), PT lowered by $3 to $82, FY12 EPS estimate lowered from $4.73 to $4.12 and FY13 from $6.35 to $5.90.

For OW-rated Delta (NYSE: DAL), PT lowered $1 to $14. FY12 EPS estimate lowered from $2.25 to $1.90 and FY13 from $3.35 to $2.90.

For EW-rated JetBlue (Nasdaq: JBLU), PT lowered from $6 to $5.50, FY12 EPS estimate from $0.59 to $0.46 and FY13 from $0.75 to $0.60.

For OW-rated Southwest (NYSE: LUV), PT lowered from $14 to $12. FY12 EPS estimate lowered from $0.83 to $0.63 and FY13 from $1.15 to $1.00.

For OW-rated Spirit Airlines (Nasdaq: SAVE), PT lowered from $32 to $30, FY12 EPS estimate cut from $1.96 to $1.82 and FY13 from $2.65 to $2.50.

For EW-rated United Continental (NYSE: UAL), PT cut from $27 to $23. FY12 EPS lowered from $3.70 to $2.31 and FY13 from $6.35 to $4.90.

For OW-rated U.S. Airways (NYSE: LCC), PT cut from $15 to $14. FY12 EPS estimate cut from $3.05 to $2.45 and FY13 from $4.10 to $3.30.

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