Despite the dismal state of the economy, people continue to travel by air for leisure, travel, and business. After the pandemic-induced lull in flying, the prospects of the airline industry are looking up.
Given the pent-up demand for travel and a strong labor market, it could be wise to add airliners Ryanair Holdings plc (RYAAY), Gol Linhas Aéreas Inteligentes S.A. (GOL), and Copa Holdings, S.A. (CPA) to one’s watchlist.
Airliners returned to profitability as travel demand soared after almost two years of pandemic-related restrictions. Airports have gotten busier, hotel occupancy is increasing, and so on.
Increasing disposable income, pent-up demand for travel, and the expansion of the international travel and tourism industry are a few of the main drivers of the airline industry’s growth.
The International Air Transport Association (IATA) upgraded its outlook for airline industry profitability in 2023. IATA expects airline net profits to reach $9.8 billion this year, surpassing the previous forecast of $4.7 billion in December last year. IATA expects industry revenue to increase 9.7% year-over-year to $803 billion.
Let’s take a closer look at the fundamentals of the featured stocks.
Ryanair Holdings plc (RYAAY)
Headquartered in Swords, Ireland, RYAAY operates scheduled-passenger airline services across Europe. It is also involved in the provision of various ancillary offerings like in-flight sales, car rentals, accommodation booking, and travel insurance, along with aircraft handling, ticketing, maintenance, and gift voucher sales.
In terms of the trailing-12-month EBIT margin, RYAAY’s 13.39% is 38.1% higher than the 9.69% industry average. Its 25.14% trailing-12-month levered FCF margin is 382.45% higher than the 5.21% industry average. Likewise, its 23.49% trailing-12-month Return on Common Equity is 68.5% higher than the industry average of 13.94%.
RYAAY’s total operating revenues for the fiscal year ended March 31, 2023, increased 124.4% year-over-year to €10.78 billion ($11.53 billion). Its profit for the year attributable to equity holders of parent came in at €1.31 billion ($1.40 billion), compared to a loss for the year of €240.80 million ($257.61 million) in the year-ago period.
In addition, its EPS came in at €1.1529, compared to a loss per share of €0.2130 in the prior-year period.
Analysts expect RYAAY’s EPS and revenue for the quarter ending June 30, 2023, to increase 103.2% and 29.5% year-over-year to $1.55 and $3.44 billion, respectively. It surpassed the EPS estimates in two of the trailing four quarters. Over the past nine months, the stock has gained 44.3% to close the last trading session at $106.56.
RYAAY’s positive outlook is reflected in its POWR Ratings. The stock has an overall rating of B, translating to a Buy in our proprietary rating system. The POWR ratings assess stocks by 118 different factors, each with its own weighting.
It has an A grade for Sentiment and a B for Quality. It is ranked #7 out of 27 stocks in the B-rated Airlines industry. To see RYAAY’s ratings for Growth, Value, Momentum, and Stability, click here.
Gol Linhas Aéreas Inteligentes S.A. (GOL)
Headquartered in Sao Paulo, Brazil, GOL provides scheduled and non-scheduled air transportation services for passengers and cargo, along with aircraft maintenance services.
Its 10.11% trailing-12-month levered FCF margin is 94.1% higher than the 5.21% industry average. Its 4.01% trailing-12-month Capex/Sales is 39% higher than the 2.89% industry average. Likewise, its 1.04x trailing-12-month asset turnover ratio is 30.3% higher than the industry average of 0.80x.
For the first quarter ended March 31, 2023, GOL’s net operating revenue increased 52.8% year-over-year to R$4.92 billion ($1 billion). Its net income for the period came in at R$136.40 million ($27.74 million), compared to a net loss of R$653.30 million ($132.86 million) in the year-ago quarter. Its EPS came in at R$0.30.
Street expects GOL’s revenue for the quarter ending June 30, 2023, to increase 33.6% year-over-year to $838.78 million. It has surpassed the consensus EPS estimates in two of the trailing four quarters. Over the past nine three months, the stock has gained 46.2% to close the last trading session at $3.83.
GOL’s POWR Ratings reflect strong prospects. It has an overall rating of B, which translates to a Buy in our proprietary rating system.
It is ranked #9 in the same industry. It has a B grade for Growth and Quality. Click here to see the other ratings of GOL for Value, Momentum, Stability, and Sentiment.
Copa Holdings, S.A. (CPA)
CPA provides airline passenger and cargo services. It is based in Panama City, Panama.
Its 38.17% trailing-12-month gross profit margin is 27.9% higher than the 29.85% industry average. Its 18.36% trailing-12-month EBIT margin is 89.5% higher than the 9.69% industry average. Likewise, its 13.80% trailing-12-month net income margin is 116.4% higher than the industry average of 6.38%.
CPA’s revenue passenger miles (RPMs) first quarter ended March 31, 2023, increased 1.5% sequentially to 5.72 billion. Its adjusted net profit rose 435.1% year-over-year to $157.80 million. The company’s cash and cash equivalents came in at $242.31 million, compared to cash and cash equivalents of $122.42 million for the fiscal year ended December 31, 2022.
For the quarter ending June 30, 2023, it is expected to increase 848.2% and 12.3% year-over-year to $3.03 and $778.98 million, respectively. It has surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 57% to close the last trading session at $111.95.
CPA’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which translates to a Buy in our proprietary rating system.
It has an A grade for Quality and a B for Sentiment. It is ranked #11 in the Airlines industry. To see the other ratings of CPA for Growth, Value, Momentum, and Stability, click here.
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RYAAY shares were trading at $108.35 per share on Thursday afternoon, up $1.79 (+1.68%). Year-to-date, RYAAY has gained 44.93%, versus a 12.39% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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