While countries worldwide are trying to return to normalcy, the latest news reports from various parts of Europe point to a sharp surge in COVID-19 cases. Germany reported its highest number of infections in a single day since the start of the pandemic. Similarly, Austria and the Netherlands have implemented partial lockdowns to prevent the virus’ spread.
Virgin Galactic Holdings, Inc.’s (SPCE) Richard Branson once famously said, “If you want to be a millionaire, start with a billion dollars and launch a new airline.” Airlines as a business venture are often highly risky due to the industry’s uncertainty. The airline industry was already facing headwinds before the pandemic. And even with the elimination of some restrictions, widespread anxiety due to the healthcare crisis remains.
With the COVID-19 situation deteriorating in Europe, the airline industry is again expected to receive a blow as rising infection rates and restrictions reduce travel demand. Amid this scenario, we think it could be wise to avoid airline stocks Delta Air Lines, Inc. (DAL), United Airlines Holdings, Inc. (UAL), and American Airlines Group Inc. (AAL).
Delta Air Lines, Inc. (DAL)
DAL, in Atlanta, Ga., provides air transportation for passengers and cargo internationally. It operates in the airline and refinery segments. While the airline segment provides passenger air transportation and cargo facilities, its refinery segment provides jet fuel to its airline segment through production or tie-ups with third parties.
For its fiscal third quarter, ended September 30, 2021, DAL’s operating revenue was $9.15 billion compared to $12.56 billion for its fiscal third quarter, ended September 30, 2019. The company’s adjusted net income was $194 million, versus $1.50 billion for the third quarter ended September 30, 2019. Also, its FCF was a negative $463 million compared to $1.42 billion for the same period.
Analysts expect DAL’s EPS to remain negative for the quarter ending December 31, 2021, and in its fiscal year 2021. Furthermore, its EPS is expected to decline at a 23.7% rate per annum over the next five years. Over the past six months, the stock has lost 14% in price to close Friday’s trading session at $39.69.
DAL’s weak fundamentals are reflected in its POWR Ratings. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
United Airlines Holdings, Inc. (UAL)
UAL is the Chicago-based holding company of United Airlines, Inc. It operates in the passenger and cargo transportation segments throughout North America, Asia, Europe, the Middle East, and Latin America.
UAL’s operating expenses for its fiscal third quarter, ended September 30, 2021, increased 63.5% year-over-year to $6.71 billion. The company’s long-term debt rose 26.9% sequentially to $31.52 billion. Also, its total operating revenue came in at $7.75 billion, down 31.9% compared to the third quarter ended September 30, 2019.
UAL’s EPS for the quarter ending December 31, 2021, and in its fiscal year 2021 is expected to remain negative. Also, its EPS is expected to decline at a 129.1% rate per annum over the next five years. The stock has lost 17.3% in price over the past six months to close Friday’s trading session at $46.11.
UAL’s POWR Ratings reflect this weak outlook. It has an F grade for Stability, and a D grade for Momentum and Sentiment. It is ranked #20 in the Airlines industry. To check the additional ratings of UAL for Growth, Value, and Quality, click here.
American Airlines Group Inc. (AAL)
With its regional airline subsidiaries and third-party regional carriers, Fort Worth, Tex.-based AAL provides air transportation for passengers and cargo. Its subsidiaries include American Airlines (American), Envoy Aviation (Envoy), PSA Airlines (PSA), and Piedmont Airlines (Piedmont).
AAL’s revenues for its fiscal third quarter, ended September 30, 2021, was $8.97 billion versus $11.21 billion for the third quarter, ended September 30, 2019. The company’s operating expenses increased 38.5% year-over-year to $8.37 billion, while its non-operating expenses increased 73.8% year-over-year to $389 million.
Analysts expect AAL’s EPS to remain negative for the quarter ending December 31, 2021, and in its fiscal year 2021. Furthermore, its EPS is expected to decline at a 105.1% rate per annum over the next five years. Over the past six months, the stock has lost 16% in price to close Friday’s trading session at $19.28.
AAL’s weak fundamentals are reflected in its POWR Ratings. It has an F grade for Sentiment, and a D grade for Momentum and Stability. It is ranked #13 in the Airlines industry. Click here to check the additional ratings of AAL for Growth, Value, and Quality.
AAL is one of the stocks currently in the POWR Charts trading alert service based upon Christian Tharp’s 5 WINNING Stock Chart Patterns. Click here to learn more.
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DAL shares were trading at $40.00 per share on Monday morning, up $0.31 (+0.78%). Year-to-date, DAL has declined -0.52%, versus a 27.86% 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. More...
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