Avoid These 2 Downgraded Airline Stocks

NYSE: LUV | Southwest Airlines Company  News, Ratings, and Charts

LUV – The airline industry has suffered record flight and booking cancellations in recent weeks amid surging omicron cases and poor weather. So, we think it could be wise to avoid recently downgraded airline stocks Southwest Airlines (LUV) and JetBlue Airways (JBLU) at this juncture. Read on.

The airline industry bore the brunt of the COVID-19 pandemic’s ill effects on industry during its initial days. However, increasing vaccination rates helped the sector begin to rebound with encouraging demand over the holiday season, owing to increased consumer confidence. Most airlines cheered when they made it through Thanksgiving week with very low cancellation rates.

However, now the COVID’s omicron-variant threat has disrupted the airline sector. Furthermore, severe weather conditions have caused record cancellations for the industry. According to FlightAware, around 7,000 flights with at least one stop in the U.S. were canceled after Christmas Eve 2021. These cancellations are expected to persist in the near term, with cases piling up daily.

Given this backdrop, we think it could be wise to avoid airline stocks Southwest Airlines Co. (LUV) and JetBlue Airways Corporation (JBLU), which analysts have recently downgraded.

Southwest Airlines Co. (LUV)

LUV in Dallas, Tex., is a passenger airline company that provides scheduled air transportation services in the United States and near-international markets. The company operates a total fleet of approximately 718 Boeing 737 aircrafts. MKM Partners analysts recently downgraded LUV from ‘Buy’ to ‘Neutral.’

LUV’s total operating revenues came in at $4.68 billion for its fiscal third quarter, ended Sept. 30, 2021, up 161% year-over-year. However, its total current liabilities were $9.13 billion for the period ended September 30, 2021, compared to $7.51 billion for the period ended Dec. 31, 2020. Furthermore, its total net operating expenses were $3.95 billion, up 23.2% year-over-year.

Analysts expect LUV’s EPS to decline at a 21% rate per annum over the next five years. Also, the stock has declined 28.7% in price over the past nine months to close yesterday’s trading session at $45.24.

LUV’s POWR Ratings reflect its poor prospects. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting. It has a D grade for Stability. Click here to access the additional POWR Ratings for LUV (Growth, Value, Momentum, Sentiment, and Quality). LUV is ranked #4 of 31 stocks in the F-Rated Airlines industry.

JetBlue Airways Corporation (JBLU)

JBLU provides air passenger transportation services. The Long Island City, N.Y.-based concern serves 98 destinations in the 30 states in the United States, the District of Columbia, the Commonwealth of Puerto Rico, the U.S. Virgin Islands, and 23 countries in the Caribbean and Latin America. Recently, the stock was downgraded by MKM Partners analysts.

For its fiscal third quarter, ended Sept. 30, 2021, JBLU’s total operating revenues increased 300.8% year-over-year to $1.97 billion. However, its total operating expenses increased 77.2% year-over-year to $1.79 billion. And its adjusted debt was $4.42 billion for the period ended Sept. 30, 2021, compared to $2.52 billion for the period ended Dec. 31, 2019.

Analysts expect JBLU’s EPS to decrease at a 126.4% rate per annum over the next five years. Over the past nine months, the stock has declined 30.5% in price to close yesterday’s trading session at $14.63.

JBLU’s POWR Ratings are consistent with this bleak outlook. The stock has a D grade for Stability. We also have graded JBLU for Growth, Value, Momentum, Sentiment, and Quality. Click here to access all the JBLU ratings. JBLU is ranked #10 in the same industry.


LUV shares were trading at $45.84 per share on Tuesday afternoon, up $0.60 (+1.33%). Year-to-date, LUV has gained 7.00%, versus a -1.52% rise in the benchmark S&P 500 index during the same period.


About the Author: Riddhima Chakraborty


Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries. More...


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