Merrill Upgrades Continental Air to 'Buy'
Merrill Lynch upgraded Continental Airlines (CAL ) to buy from neutral.
Merrill also upgraded Frontier Air (FRNT ), Delta Air (DAL ) , Northwest Air (NWAC ), and Alaska Air (ALK ) to buy from neutral.
Analyst Michael Linenberg says the worst may be over for airlines (i.e. war, SARS, recession). He notes the industry's restructuring is well under way. Their initiatives -- labor, aircraft retirements, etc. -- may not be viewed as dramatic, but he thinks these issues will have a larger positive impact on bottom lines than is implied by current forecasts.
Linenberg says the bankruptcy threat has diminished for most airlines. He notes Continental boasts industry-leading operational metrics. Also, he says Continental's p-e multiple looks attractive. He sees a $5.50 2003 loss per share, and a $1.00 2004 loss per share for Continental. He also has a $16 target on the shares.