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Airline Stock Roundup: GOL Linhas, Copa Holdings’ Q1 Earnings, Delta’s Dividend Hike & More

Zacks

The past week saw Latin American carriers GOL Linhas GOL and Copa Holdings CPA reporting their respective earnings numbers for the first quarter of 2017. Even though GOL Linhas reported better-than-expected earnings per share, the bottom line contracted on a year-over-year basis due to higher costs. Copa Holdings topped expectations both with respect to earnings and revenues.

On the non-earnings front, Delta Air Lines’ DAL decision to hike its quarterly dividend and approve new buyback plan grabbed attention. Warren Buffett’s move to increase stakes in airline heavyweights like American Airlines Group AAL and Southwest Airlines LUV also invited attention.

The past week also saw the likes of JetBlue Airways Corp. JBLU and GOL Linhas reporting their respective April traffic numbers.

Transportation – Airline Industry 5YR % Return


Transportation – Airline Industry 5YR % Return

(Read the last Airline Stock Roundup for May 10, 2017).

Recap of the Past Week’s Most Important Stories

1. Delta announced in a regulatory filing that its board of directors has approved a new share repurchase program worth $5 billion. The new share buyback plan is expected to be completed by Jun 2020. Simultaneously, the airline behemoth increased its quarterly dividend by over 50% (Read more: Delta Rewards Investors with Dividend Hike & New Buyback).

2. JetBlue Airways posted a significant rise in air traffic for the month of Apr 2017. Traffic – measured in revenue passenger miles (RPMs) – improved 8.2% year over year to 4.06 billion. Load factor or percentage of seats filled by passengers increased 120 basis points (bps) to 85.3% in the month (Read more: JetBlue Airways April Traffic Rises 8.2%, Capacity Up).

3. GOL Linhas’ first-quarter 2017 earnings per share of $1.06 topped the Zacks Consensus Estimate of 15 cents. Net revenue in the first quarter of 2017 came in at $841.2 million (R$2.6 billion). While cargo revenues increased 27.3%, passenger revenues declined 5.8% (Read more: GOL Linhas Q1 Earnings Beat Estimates, Decrease Ý/Y).

This apart, the carrier reported air traffic numbers for the month of April. Consolidated traffic – measured in revenue passenger kilometers (RPK) – improved 6.9% to 2.7 billion on a year-over-year basis. International and domestic RPK in the month rose 3.2% and 7.4%, respectively (Read more: GOL Linhas Reports 6.9% Rise in April Air Traffic).

4. Copa Holdings’ first-quarter earnings (on an adjusted basis) of $2.43 per share beat the Zacks Consensus Estimate of $2.29. Earnings were also well above the year-ago figure of $1.66. Quarterly revenues improved 10.6% year over year to $617 million. Revenues also beat the Zacks Consensus Estimate of $615 million.

The year-over-year increase in the top line was primarily due to a 10.9% improvement in passenger revenues. Passenger unit revenue per available seat mile (PRASM) improved 6.3%, whereas yield per passenger mile inched up 0.9%. Operating cost per available seat mile (CASM) increased 3.3% in the quarter. Unit revenue per available seat mile (RASM) improved 6%.

Passenger traffic (on a consolidated basis) climbed 9.9% and capacity expanded 4.3% during the quarter. Load factor climbed 410 basis points (bps) to 81.5% as traffic growth outweighed capacity expansion of this Zacks Rank #3 (Hold) carrier. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

5. Warren Buffett, founder and CEO of Berkshire Hathaway, increased his stakes in American Airlines and Southwest Airlines in the first quarter of 2017 by 8% and 10%, respectively. The data is according to a regulatory filing by the Omaha, NE-based company. While Buffet has reduced his holdings in Delta, his holdings in United Continental Holdings UAL remain unchanged.

Performance

The following table shows the price movement of the major airline players over the past week and during the last 6 months.

Company

Past Week

Last 6 months

HA

0.46%

13.31%

UAL

0.55%

20.7%

GOL

-8.76%

-6.07%

DAL

-0.38%

4.5%

JBLU

-1.69%

6.43%

AAL

-0.81%

5.6%

SAVE

-1.65%

3.13%

LUV

-0.48%

27.09%

CPA

-0.76%

35.14%

ALK

0.8%

8.95%

The table above shows that the majority of airline stocks traded in the red over the past week, although most loses were subdued in nature. The NYSE ARCA Airline Index inched up 0.83% to $115.82 over the past week. Over the course of six months, the NYSE ARCA Airline Index appreciated 12.82%. Shares of Copa Holdings appreciated the most (35.14%) during the period.

What's Next in the Airline Space?

Focus will be on presentations by many leading carriers at various conferences in the coming days. Further updates on the ban of electronic items on flights will also be keenly awaited.

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