Zacks Investment Ideas feature highlights: Alaska Air Group, US Airways, Gol
Linhas and Hawaiian Holdings
CHICAGO, April 10, 2013
CHICAGO, April 10, 2013 /PRNewswire/ --Today, Zacks Investment Ideas feature
highlights Features: Alaska Air Group, Inc. (NYSE:ALK ), US Airways
(NYSE:LCC), Gol Linhas (NYSE:GOL) and Hawaiian Holdings Inc. (Nasdaq:HA ).
Airline Stocks: The Good, the Bad, the Ugly
Suddenly, airline stocks are hot. After decades of being in the dog house,
airline stocks are one of THE top Wall Street stories of 2013.
CNBC's Jim Cramer recently said he's hated airline stocks since 1985 but
consolidation in the industry means that the price wars are over so it's an
investable business again. He's finally recommending airline stocks again this
Legg Mason's Bill Miller, whose Capital Management Opportunity mutual fund,
according to Morningstar, was one of the top performers over the last 12
months, owns not just one but three airline stocks. He's been vocal about his
love of airline stocks in interviews over the past few months.
But are they really that great?
Or is the group just working off of very low expectations?
No Zacks Rank #1s
Using the Zacks Rank, which measures rising earnings estimates, I set out to
find the good within the airline sector. Unfortunately, I also found the bad
and the downright ugly.
Given how hot the industry is, I expected to see a couple of Zacks Rank #1
(Strong Buys) among the group. But I was wrong. In fact, out of 23 companies
Zacks lists as being in the airline industry, not a single one has a Zacks
Perhaps that's why the airline industry has a low Zacks Industry Rank of 248
out of 265. That rank means 94% of all industries rank higher than the
airlines. That's not great.
Still, there must be SOME hidden gems among the group, right?
There's no contest. Only one airline fits the "good" category right now.
Only Alaska Air Group, Inc. (NYSE:ALK ) has a Zacks Rank #2 (Buy).
The analysts are bullish on Alaska Air. 4 estimates have moved higher for 2013
in the last 30 days. Earnings are expected to grow 14% in both 2013 and 2014.
It has an attractive forward P/E of 11 and a P/S ratio of 0.9. A P/S ratio
under 1.0 can mean a company is undervalued.
Shares have soared in 2013, only recently hitting a bump and pulling back from
new 52-week highs.
There are also 13 companies that are Zacks Rank #3 (Hold) stocks. These
include US Airways (NYSE:LCC), one of the stocks Miller's Capital Management
Opportunity currently owns.
But not everything is as rosy in the airline industry as all the articles and
recommendations make it seem. Five companies out of 23 are Zacks Rank #4
One of those is Gol Linhas (NYSE:GOL), the low cost Brazilian carrier which
many like to call "the Southwest of Latin America." While Brazil was expected
to be the next big market for airlines, rising fuel costs and an increase in
landing fees in Brazil have hit Gol Linhas hard.
On Mar 26, the company reported its fourth quarter results and missed the
Zacks Consensus by 109%. It hasn't beat the Zacks Consensus since 2011.
Gol Linhas is expected to see a loss of $0.04 this year coming on the heels of
a loss of $2.88 last year and $1.55 in 2011. The company announced it was
cutting domestic flights by 7% this year in order to try and get profitable.
Shares followed the rest of the sector higher in 2013 but sold off after the
recent disappointing earnings report.
Four of the airlines are Zacks Rank #5 (Strong Sells), including Hawaiian
Holdings, the holding company for Hawaiian Airlines which provides service
between the Hawaiian islands, the West Coast, and Tahiti, Korea, Japan and
Hawaiian Holdings Inc. (Nasdaq:HA ) has been expanding by adding non-stop
service to New York and flying to more international destinations. However, a
big 100% earnings miss last quarter has analysts lowering 2013 estimates.
Over the last 90 days, the 2013 Zacks Consensus Estimate has dropped to $1.05
from $1.48 per share. Earnings are now expected to decline by 1% in 2013.
Shares are cheap, with a forward P/E of just 5, but after peaking in very
early 2013, they have slid sharply and are trading near a multi-month low.
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