Despite macroeconomic challenges, the airline industry is expected to remain robust this year as air travel rebounds. So, quality airline stocks Delta Air Lines, Inc. (DAL), United Airlines Holdings, Inc. (UAL), and American Airlines Group Inc. (AAL) could be wise additions to your portfolio.
According to the International Air Transport Association (IATA), the airline industry is expected to make a net profit of $9.8 billion in 2023, more than double the previous forecast of $4.7 billion. Also, the group expects around 4.35 billion people to fly commercial in 2023, or about 96% of 2019 levels.
Moreover, the global demand for the airline technology integration market is expected to grow at a CAGR of 16.11% until 2030 to $88.22 billion. Airlines are using technology to improve the customer experience, streamline operations, and remain competitive.
In addition, the global airline industry is expected to grow at a CAGR of 25.5% until 2027. The airline industry is predicted to grow with increasing discretionary income and travel demand, while stable jet fuel prices allow for surcharges and revenue growth.
Investors’ interest in airline stocks is evident from the U.S. Global Jets ETF's (JETS) 18% returns over the past three months.
Take a detailed look at the stocks mentioned above:
Delta Air Lines, Inc. (DAL)
DAL provides scheduled air transportation for passengers and cargo in the United States and internationally. The company operates through two segments, Airline and Refinery.
DAL’s forward EV/Sales of 0.91x is 48.7% lower than the industry average of 1.77x. Its forward Price/Sales of 0.51x is 62.6% lower than the industry average of 1.37x.
DAL’s trailing-12-month CAPEX/Sales of 10.93% is 277.7% higher than the industry average of 2.89%. Its trailing-12-month ROCE of 50.16% is 267.6% higher than the industry average of 13.64%.
DAL’s total operating revenues for the second quarter ended June 30, 2023, increased 12.7% year-over-year to $15.58 billion. Its adjusted operating income came in at $2.49 billion, up 72.6% year-over-year.
Also, its adjusted net income and EPS came in at $1.72 billion and $2.68, up 87.1% and 86.1% year-over-year, respectively.
The consensus revenue estimate of $57.13 billion for the year ending December 2023 represents a 13% increase year-over-year. Its EPS is expected to grow 110.1% year-over-year to $6.72 for the same period. DAL’s shares have gained 45.2% over the past year to close the last trading session at $45.75.
DAL’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
DAL also has a B grade for Growth, Momentum, Sentiment, and Quality. It is ranked #9 out of 28 stocks in the A-rated Airlines industry. Click here for the additional POWR Ratings for Stability and Value for DAL.
United Airlines Holdings, Inc. (UAL)
UAL, through its subsidiaries, provides air transportation services in North America, Asia, Europe, Africa, the Pacific, the Middle East, and Latin America.
On July 12, 2023, UAL introduced a new domestic first-class seat with wireless charging, vegan leather upholstery, 13-inch screens, 18-inch tray tables, Bluetooth, privacy screens, and an ergonomic design.
Mark Muren, United Managing Director of Identity, Product, and Loyalty at UAL, said, “As we evolve the onboard experience, we’re upending old industry norms and anticipating future needs to accommodate the new ways people live and travel.”
UAL’s forward EV/EBITDA of 3.99x is 64.2% lower than the industry average of 11.13x. Its forward EV/EBIT of 6.11x is 61% lower than the industry average of 15.68x.
UAL’s trailing-12-month CAPEX/Sales of 14.01% is 384.1% higher than the industry average of 2.89%. Its trailing-12-month ROCE of 45.69% is 234.9% higher than the industry average of 13.64%.
For the second quarter that ended June 30, 2023, UAL’s total operating revenue increased 17.1% year-over-year to $14.18 billion. Its non-GAAP operating income rose 140% from the same quarter last year to $2.38 billion. Also, its non-GAAP net income increased 253.9% from the year-ago quarter to $1.67 billion, and non-GAAP EPS grew 251.7% year-over-year to $5.03.
Analysts expect UAL’s revenue to increase 18.6% year-over-year to $53.32 billion for the year ending December 2023. Its EPS is expected to grow 332.2% year-over-year to $10.89 for the same period. It has surpassed EPS estimates in all four trailing quarters. Over the past year, the stock has gained 46.2% to close the last trading session at $53.26.
UAL’s POWR Ratings reflect strong prospects. It has an overall rating of B, which translates to a Buy in our proprietary rating system. It has a B grade for Momentum, Value, and Sentiment. It is ranked #11 in the same industry.
Beyond what is stated above, we’ve also rated UAL for Quality, Stability, and Growth. Get all UAL ratings here.
American Airlines Group Inc. (AAL)
AAL operates as a network air carrier under the American Eagle brand. It provides scheduled air transportation services for passengers and cargo through its hubs in Charlotte, Chicago, Dallas/Fort Worth, Los Angeles, Miami, New York, Philadelphia, Phoenix, and Washington, D.C., and partner gateways in London, Doha, Madrid, Seattle/Tacoma, Sydney, and Tokyo.
AAL’s forward non-GAAP P/E of 4.98x is 72% lower than the industry average of 17.77x. Its forward Price/Sales of 0.20x is 85.1% lower than the industry average of 1.37x.
AAL’s trailing-12-month CAPEX/Sales of 5.19% is 79.3% higher than the industry average of 2.89%. Its trailing-12-month ROTC of 8.71% is 24.4% higher than the industry average of 7%.
AAL’s total operating revenues increased 4.7% year-over-year to $14.06 billion for the fiscal second quarter that ended June 30, 2023. The company’s operating income increased 112.7% from the year-ago quarter to $2.16 billion. Also, its net income increased 181.1% year-over-year to $1.34 billion, while its EPS increased 176.5% from the prior-year quarter to $1.88.
Street expects AAL’s revenue and EPS to increase 7.9% and 565.6% year-over-year to $52.86 billion and $3.33 for the year ending December 31, 2023, respectively. It surpassed the EPS estimates in three of four trailing quarters. The stock has gained 28.7% over the past three months to close the last trading session at $16.57.
It’s no surprise that AAL has an overall B rating, equating to a Buy in our POWR Ratings system. It has a B grade for Value, Momentum, and Quality. It is ranked #10 in the same industry. To see additional AAL’s ratings for Stability, Sentiment, and Growth, click here.
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DAL shares were trading at $45.70 per share on Friday afternoon, down $0.05 (-0.11%). Year-to-date, DAL has gained 39.37%, versus a 20.41% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
Are These 3 Airline Stocks a Buy Now? StockNews.com
