Image: BigstockSolid recovery in air travel demand, both domestic and international, has been aiding the Zacks Airline industry following the easing of COVID-19 travel restrictions and the reopening of the global economy. People are once again booking flights, thereby leading to higher passenger revenues, which contribute to the bulk of most airlines’ top line.We believe that the current summer season is likely to see a further surge in passenger revenues, in turn aiding airlines’ top lines. Per Airlines for America, U.S. airlines are anticipated to carry 271 million passengers from June 1 to Aug. 31, 2024. This projection marks an all-time high.Further, the bullish projection for 2024 by the International Air Transport Association (IATA) confirms airlines’ buoyancy. Owing to the buoyant air travel demand scenario, IATA now expects the industry to generate a net profit of $30.5 billion in 2024 compared with $25.7 billion estimated in December 2023.Net profit in 2023 was $27.4 billion. The top line in 2024 is now anticipated to be $996 billion compared with the previous estimate of $964 billion. The revised revenue forecast, a record high, indicates a 9.7% increase from the 2023 actuals.Passenger revenues are the biggest driver of the rosy projection for 2024. Per IATA, passenger revenues in 2024 are now anticipated to be $744 billion compared with the previous estimate of $717 billion. The revised revenue forecast indicates a 15.2% increase from the 2023 actuals. Per IATA, a record 4.96 billion people are likely to take to the skies in 2024.The buoyancy in the industry is further confirmed by its Zacks Industry Rank #97, which places it in the top 39% of more than 250 Zacks industries. Notably, the Zacks Airline industry has risen 13.2% so far this year, outperforming the 4.8% decline of the broader Zacks Transportation sector.
Image Source: Zacks Investment Research
Investing in Airline Stocks: A Prudent Idea
Given this encouraging backdrop, we present four airline stocks, Copa Holdings, S.A. (CPA – Free Report), SkyWest, Inc. (SKYW – Free Report), United Airlines Holdings, Inc. (UAL – Free Report), and Alaska Air Group, Inc. (ALK – Free Report), which investors can bet on.Most of these stocks maintain ratings of either Zacks Rank #1 (Strong Buy) or #2 (Buy), as well as VGM Scores of A or B. These stocks have also witnessed upward estimate revisions in the past 90 days. Additionally, the aforementioned stocks have a strong trailing four-quarter average earnings surprise history.Our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 or #2, offer the best investment opportunities for investors. The selected companies seem to be compelling investment propositions at the moment. Each of these companies boast a market capitalization of more than $1 billion.
Copa Holdings
This Panama City-based company provides airline passenger and cargo services.Upbeat air travel demand has been aiding Copa Holdings, S.A.’s revenues. Management expects the current-year load factor (percentage of seats filled by passengers) to be 87%, assuming that the rosy traffic scenario continues. For 2024, the company expects consolidated capacity, or available seat miles, to register 10% growth year-over-year. Operating margin is projected in the 21%-23% band.Copa Holdings flaunts a Zacks Rank #3 (Hold) and has a VGM Score of A. The Zacks Consensus Estimate for Copa Holdings’ 2024 earnings per share (EPS) has moved up 3% in the past 90 days. The stock has a trailing four-quarter earnings surprise of 20.19%, on average. Copa Holdings has a market capitalization of $3.92 billion.
Copa Holdings, S.A. Price and EPS Surprise
Image Source: Zacks Investment Research, Copa Holdings, S.A. Quote
SkyWest
This Saint George, UT-based company engages in the operation of a regional airline in the United States.SkyWest, Inc. flaunts a Zacks Rank #1 (Strong Buy) and has a VGM Score of A. The Zacks Consensus Estimate for SkyWest’s 2024 EPS has moved up 6.9% in the past 90 days. Its expected growth rate for 2024 is more than 100%. The stock has a trailing four-quarter earnings surprise of 128.09%, on average. SkyWest has a market capitalization of $3.19 billion.
SkyWest, Inc. Price and EPS Surprise
Image Source: Zacks Investment Research, SkyWest, Inc. Quote
United Airlines
This Chicago, IL-based company provides air transportation services in North America, Asia, Europe, Africa, the Pacific, the Middle East, and Latin America.United Airlines Holdings, Inc. currently carries a Zacks Rank #2 (Buy) and has a VGM Score of A. The Zacks Consensus Estimate for United Airlines’ 2024 EPS has moved up 2.2% in the past 90 days. The stock has a trailing four-quarter earnings surprise of 32.34%, on average. United Airlines has a market capitalization of $15.84 billion.
United Airlines Holdings, Inc. Price and EPS Surprise
Image Source: Zacks Investment Research, United Airlines Holdings Inc Quote
Alaska Air
This Seattle, WA-based company operates airlines.Anticipating air-travel demand to be rosier given the presence of the summer holiday period, Alaska Air Group, Inc. issued bullish EPS guidance for second-quarter 2024 after posting a loss in the first quarter of 2024. Alaska Air expects second-quarter EPS between $2.20 and $2.40. To meet the upbeat demand, the company is boosting capacity.The company expects available seat miles (a measure of capacity) to increase in the range of 5%-7% in the second quarter of 2024 from second-quarter 2023 actuals. Adding to the bullishness, management lifted its 2024 EPS between $3.25 and $5.25 (earlier guidance was in the $3-5 range).Alaska Air presently carries a Zacks Rank #2 (Buy) and has a VGM Score of B. The Zacks Consensus Estimate for Alaska Air’s 2024 EPS has moved up 1.5% in the past 90 days. Its expected growth rate for 2024 is 3.53%. The stock has a trailing four-quarter earnings surprise of 22.68%, on average. Alaska Air has a market capitalization of $5.22 billion.
Alaska Air Group, Inc. Price and EPS Surprise
Image Source: Zacks Investment Research, Alaska Air Group, Inc. QuoteMore By This Author:Are Microcaps A Good Proxy For Private Equity? Why Apple Dipped More Than Broader Market FridayWalmart Stock Moves -0.15%: What You Should Know
