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Eric Wells
Eric Wells

Airline Stocks To Buy

Since the beginning of the year, airline stocks have signaled the industry might just be recovering from the Covid pandemic. Earnings reports suggest airlines are getting back to pre-pandemic levels, with air carriers seeing strong demand for air travel.

airline stocks to buy

So far in 2023, the number of people traveling by airplane is on par with pre-pandemic levels, according to Transportation Security Administration data. As more people take to the skies, airline stocks also soared in the early part of the year but are currently mixed.

The airline stock advance in January came after many companies booked losses and suffered weather-related cancellations in December. At the time, the industry was upbeat about demand and that business is back to normal after nearly three years of Covid woes.

Then, toward the end of 2022, the airline industry was just a fragment of the U.S. economy. Airlines were upended by freezing temperatures, high winds and snowfall from a massive winter storm that blanketed more than half of the U.S.

The storm forced much of the U.S. airline network to shut down. Most carriers recovered normal operations within days. But Southwest Airlines lagged far behind the rest of the airline industry, attempting to recover from weather disruptions which resulted in thousands of canceled flights.

In January, following December's air travel fiasco, the Federal Aviation Administration also grounded thousands of flights across the U.S. for several hours after a key computer system failed. However airline stocks showed only a mild response.

Investors should remember the volatile nature of travel when thinking about adding exposure to airline stocks. One way to modestly diversify industry holdings is via the U.S. Global Jets ETF (JETS). The fund is up 8% so far in 2023; it fell 19% in 2021.

American Airlines ranks fifth among the airline stocks in the Transportation-Airline industry group. AAL stock has a Composite Rating of 88. It has a 84 Relative Strength Rating, an exclusive IBD Stock Checkup gauging share-price movement. AAL has an EPS Rating of 78.

The airline's Q4 revenue and earnings both jumped more than expected by analysts. Earnings of $2.46 per share topped analysts' $2.10 target. Revenue came in at $12.4 billion, vs. the $12.23 estimate. Judged against the pre-pandemic benchmark of Q4 2019, United's operating margin increased by 14%. Revenue per seat mile swung 26% higher.

United Airlines currently has formed a flat base with a 53.36 buy point, according to MarketSmith. In early December, United Airlines stock staged a halting breakout from a 45.67 buy point in a long cup-with-handle base. As airlines stocks across the industry took a beating, the stock immediately fell more than 8% below the entry, triggering the automatic stop-loss rule.

United Airlines and Copa have a strategic alliance. Copa Airlines was founded in 1947 as the National Airline of Panama. Today it is a leading Latin American provider of airline passenger and cargo service. The Copa holding company has two principal operating subsidiaries, Copa Airlines and Copa Colombia.

The airline stock has been below its 200-day line since Dec. 14. It has repair work to do, but a jump back above the 200-day average could present an opportunity. LUV stock has a Composite Rating of 35. Its Relative Strength Rating is 19 and its EPS Rating is 30.

The market is in correction and IBD ratings for airline stocks are mixed. Investors eager to add exposure could step up once some airline stocks enter buy zones. But IBD advises investors to seek stocks with better ratings, and with Relative Strength Ratings that are closer to their highs.

Now might seem like a curious time to consider the best airline stocks to buy. After being beat down by the COVID-19 pandemic, gasoline prices are skyrocketing, with jet fuel prices up more than 126% in a year. The U.S. Global Jets ETF (ticker: JETS), an exchange-traded fund, or ETF, that tracks the airline industry, dropped 9.3% between April 18 and May 18. But people still need and want to fly, so while the pandemic and fuel prices present near-term headwinds, airline stocks can still thrive over the long term. Morningstar analyst Burkett Huey writes that the fact that airlines like Delta have posted relatively flat revenue despite a 120% sequential quarterly increase in COVID-19 cases this year "indicates consumer travel is considerably less sensitive to COVID-19 than it was in prior quarters." If you're willing to weather some near-term headwinds for potential long-term gain, these are eight of the best airline stocks to buy for 2022.

Southwest is the blue-chip of airlines, combining both a robust balance sheet and a great low-cost business model. The company has two predominant strengths over its rivals. First, it has one of the best credit ratings of the major American carriers. To that end, it was carrying about $12.5 billion in cash and cash equivalents at the end of 2021. Southwest didn't have to dilute its equity dramatically or issue tons of debt during the crisis either. It's easy to think frailer rivals such as American Airlines Group Inc. (AAL) are "cheap" because their stock prices haven't recovered from pandemic-induced losses yet. But when you look at the complete picture, Southwest is actually one of the strongest valuation plays in the airline sector as its overall enterprise value has actually rebounded less quickly than its more-indebted rivals. Southwest's catering to tourists and leisure travelers should also help it return to strong profitability; business travel has been slower to rebound.

IATA recently published a report predicting that 2023 will see the global airline industry return to profitability for the first time since COVID-19, forecasting a net profit of $4.7 billion, passenger volumes of 4.2 billion travelers, and demand reaching 85.5% of 2019 levels. The report also revised predicted losses for 2022 down from $9.7 billion to $6.9 billion.2

CRUZ is a travel ETF that tracks the BlueStar Global Hotels, Airlines, and Cruises Index, a rules-based weighted index of airlines, hotel stocks, and cruise companies. CRUZ has an expense ratio of 0.45% and is currently trading at $16.109.

Ireland-based budget airline company Ryanair, which serves a number of European countries, is a surprise post-pandemic travel success story. The company bucked trends by holding onto most of its staff during the pandemic, which enabled it to capitalize on the travel rebound better than many competitors and earn a new reputation for reliability.

Read on as we take a closer look at how seven airline stocks look amid this rocky road to recovery. Not all names are created equal; the best airline stocks are flying on far sturdier wings than their peers. We'll look to identify the strongest candidates.

Air Lease is exactly what it sounds like. It buys, sells and leases aircraft to global carriers and other third parties, including fellow leasing companies, financial services firms and airlines. In addition, the company provides fleet management services to investors and owners of aircraft portfolios.

At the beginning of 2022, AL owned a fleet of nearly 400 aircraft. And with the "just-in-time" scheduling that creates nightmares for undersupplied airlines, the company has been able to rent out that fleet consistently and at premium prices.

AL has a massive backlog of 430 new aircraft on order from Boeing (BA (opens in new tab)) and Airbus (EADSY (opens in new tab)) set to deliver through 2028, which could kick off a new chapter in the long-term growth of one of Wall Street's best airline stocks.

Air Transport Services Group (ATSG (opens in new tab), $29.52) isn't one of the traditional airline stocks, rather it's a logistics player with a homegrown fleet of more than 100 aircraft. And it's one of the rare names in this industry that has squeaked out a year-to-date gain in 2022, even amid high fuel costs and supply-chain disruptions that linger in the wake of the pandemic.

Because of its unique areas of expertise, ATSG has been able to figure out a path to growth and success, even as larger and more traditional airlines have struggled. Revenue is set to grow by almost 16% this year and another 10% in fiscal 2023.

It's tempting to go with airline stocks you recognize from your own travels, but ATSG is a cut above the rest right now. Given its deep relationships with customers and its logistical expertise, it clearly has what it takes to survive this challenging environment and plot a long-term path to success.

Longer term, ALK just announced in March that it is planning to expand its fleet with bigger Boeing 737-10 planes and longer-range 737-8s. These are part of the 737 MAX family of planes that will help it achieve even bigger growth in the years ahead. That bodes well for the future of this top airline, as well as its shares.

China Eastern Airlines (CEA (opens in new tab), $18.18) is the most exotic of the airline stocks on this list. CEA is a regional and mostly state-owned carrier that serves this important Asia economy.

Spirit Airlines (SAVE (opens in new tab), $24.01) is the discount airline with the trendy ticker symbol. It is also the only traditional airline stock valued at $2 billion or more that has actually posted a year-to-date gain in 2022. That 10% rise in Spirit's share price shows it's not just among the best companies in this industry, but also proof that it has a lot to offer even in a stormy economic environment that is battering consumer stocks of all sorts.

Every day TheStreet Quant Ratings produces a list of the top rated stocks, by industry. The following stocks are rated the highest among their industry peers by our completely independent, unbiased model based on historical risk-adjusted performance and value relative to each company's earnings prospects. This list will be updated as upgrades and downgrades occur.

And, of course, while airlines are widely recognized as one of the safest ways to travel, they also face the risk of repercussions from catastrophic events such as crashes due to malfunctions or terroristic attacks. 041b061a72


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