From the other side of the pond:
Analysts Raise Airline Estimates Across the Board
Ted Reed
05/24/12 - 09:58 AM EDT
CHARLOTTE, N.C. (TheStreet) -- Analysts are upgrading the entire airline industry because lower fuel prices, combined with
continuing strong demand, likely mean higher profits for carriers.
Airline operating profits should rise 55% in 2012 and another 40% in 2013, JPMorgan analyst Jamie Baker wrote in a report
issued Thursday. Airline shares were rising shortly after the opening Thursday, with Delta (DAL), United (UAL) and US
Airways (LCC) all up around 5% in mid-morning trading.
"Lower fuel has a material impact (and) jet fuel prices have collapsed roughly 40 cents per gallon since February,
representing an annualized $5.5 billion windfall for the industry," Baker wrote. "Yet, since the end of earnings (season)
consensus has barely budged.
"Consensus appears wholly inadequate to us," he said.
Baker raised year-end price targets to $39.50 from $37.50 for Alaska (ALK); to $17 from $14.50 for US Airways; to $38
from $35 for United; to $9 from $8.50 for JetBlue (JBLU); and to $12.50 from $12 for Southwest (LUV). (JP Morgan is
restricted regarding Delta following its involvement in an April 30th transaction.)
Baker's upgrades follow similar actions earlier this week by Dahlman Rose analyst Helane Becker and Bank of America
Merrill Lynch analyst Glenn Engel, who also raised estimates for all carriers.
"With lower jet fuel costs and improving revenues we are adjusting our second quarter and 2012 estimates," Becker wrote.
"On average we lowered jet fuel and increased EPS by 10 cents."
Becker has buys on Alaska, Delta, Southwest, Spirit (SAVE) and United and holds on JetBlue and US Airways, which is
trading partially on merger speculation and has already risen 110% this year. Engel, meanwhile, wrote that "many airline
stocks have more than 50% upside potential over the next year." His top pick is Delta, with a $15 price target.