Wall Street Firm Bullish on Airlines, Ups Estimates and Price Targets

Most airline stocks have had a rough go of it so far in 2016, but Buckingham Research Group analyst Daniel McKenzie believes things are looking up for Q1 earnings season. Buckingham has raised its Q1 earnings estimates for JetBlue Airways Corporation JBLU and Delta Air Lines, Inc. DAL and upped its price targets for Delta, American Airlines Group Inc AAL and United Continental Holdings Inc UAL.
 

McKenzie remains bullish on airline stocks and sees their compelling valuations providing a floor in the near-term.
 

“Today, the XAL remains 13.5% off a 52-week high and from our perspective, earnings could fall 40% on average for the Big 3 and valuations would remain attractive (e.g. with AAL’s stock currently trading at $39.13, we could cut our 2016 EPS by 30% and the current valuation implies a 10x P/E/ multiple) in the context of otherwise improving fundamentals and massive FCF,” McKenzie explains.

Related Link: Airline Stocks Could See 'Modest Relief' Soon

He notes that at current valuations, many of the airlines would chose to go private before they would ever consider bankruptcy.

Headed into Q1 earnings season, Buckingham has Buy ratings on Delta, American, JetBlue, United, Southwest Airlines Co LUV, Alaska Air Group, Inc. ALK and Spirit Airlines Incorporated SAVE.

Disclosure: the author holds no position in the stocks mentioned.