5 Airline Stocks to Buy Now as Industry Shines

March 15, 2018 by Lee Jackson

If there is any industry that is reasonably dependent on a solid economic climate, it’s the airlines, and with good reason. Plain and simple, if the economy is bad and take home pay is flat, or even in danger, people just don’t travel. That is one of the first things cut out of a budget, whether it’s a family or business budget. With the economy roaring at perhaps the best level in almost 20 years, planes are packed, and the top companies are making big money.

In a new research piece, Deutsche Bank stays very positive on the airlines, noting that metrics from the industry continue to come in outstanding. The report said this:

March quarter revenues trending better-than-expected Over the past day, several US airlines provided updated views in conjunction with presenting at a competitor conference. One key theme that emerged from the presentations is that while overall Mar Q revenue trends are solid, international revenues, particularly in transatlantic markets, are trending better than domestic revenues.

They also cited the big pickup in overseas travel:

What’s driving the strength in international markets? We think US dollar weakness, the return of fuel surcharges, and improved macro backdrops (notably Europe and Latin America) are all contributing to international unit revenue outperformance.

The following stocks are rated Buy and look like solid additions to growth portfolios.

Alaska Air

This company has a big west coast exposure and continues to rank high on Wall Street. Alaska Air Group Inc. (NYSE: ALK) is the parent company of Alaska Airlines, and it reported impressive traffic data buoyed by strong demand. The company serves more than 100 cities through an expansive network in Alaska, the Lower 48 states, Hawaii, Canada and Mexico. Despite recent challenges by other carriers for superiority in the Northwest, the company has strong customer loyalty, which has contributed to outstanding earnings and revenue growth.

The company reported solid operational results in February, though revenue per available seat is expected to be down some for the quarter. Most on Wall Street remain extremely bullish on the shares.

The Deutsche Bank price target for the stock is $75, while the Wall Street consensus target is $79. Shares traded early Wednesday at $65.90.

American Airlines

This company has a major hub in Dallas, where business continues to boom. American Airlines Group Inc. (NASDAQ: AAL) is the holding company for American Airlines.

Together with wholly owned and third-party regional carriers operating as American Eagle and US Airways Express, the airlines operate an average of nearly 6,700 flights per day to 350 destinations in over 50 countries from its hubs in Charlotte, Chicago, Dallas/Fort Worth, Los Angeles, Miami, New York, Philadelphia, Phoenix and Washington, D.C.

Deutsche Bank has a $60 price target, and the consensus target is $64.11. Shares were trading at $55.25.

Delta Air Lines

This stock consistently has ranked high with Wall Street. Delta Air Lines Inc. (NYSE: DAL) and the regional Delta Connection carriers offer service to 334 destinations in 64 countries on six continents. Headquartered in Atlanta, Delta employs nearly 80,000 employees worldwide and operates a mainline fleet of more than 700 aircraft.

Wall Street analysts have long lauded that Delta has the most extensive hedging policy among the airlines and owns and operates a refinery in addition to a sizable hedging book. The stock outperformed last year, and if bookings and the economy continue to spike up in 2018, many believe that the company’s multiple stands to benefit the most among the major carriers.

Investors receive a 2.17% dividend. The $73 Deutsche Bank price objective compares with a $71.82 consensus estimate. The stock traded at $55.95.

JetBlue

This stock has traded sideways for well over a year and may be looking to breakout. JetBlue Airways Corp. (NASDAQ: JBLU) is a point-to-point airline that operates out of its headquarters in New York, as well as Boston, Fort Lauderdale/Hollywood, Los Angeles (Long Beach), Orlando and San Juan. JetBlue carries more than 32 million customers a year to 87 cities in the United States, the Caribbean and Latin America with an average of 850 daily flights.

The company has been walloped by storms this winter, and its big east coast presence has resulted in an unusually large number of canceled flights. Despite the weather issues, the company reported an increase in traffic of 6.8% on a capacity increase of 6.8%.

Deutsche Bank has set its price objective at $26. The consensus target price is $24.33, and shares traded at $22.30.

United Continental

This company has found a way to constantly shoot itself in the foot, but business still remains strong. United Continental Holdings Inc. (NYSE: UAL) is the holding company for United Airlines and United Express, which operate an average of 5,055 flights a day to 373 airports across six continents.

United’s key U.S. hubs include Chicago, Denver, Houston, Los Angeles, New York/Newark, San Francisco and Washington, D.C. The airline is a founding member of Star Alliance, which provides service to 193 countries via 27 member airlines.

The Deutsche Bank price target is $81. The consensus target is $82.31, and share traded at $70.60.

These five top stocks should continue to do well as the economy marches along. With spring and then the busy summer travel months right around the corner, now may be a good time to add any of these stocks to growth accounts.

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