For Immediate Release
Chicago, IL – September 10, 2010 – Zacks Equity Research highlights Expeditors International (EXPD) as the Bull of the Day and Hudson City Bancorp (HCBK) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Southwest Airlines Co. (LUV), Delta Air Lines (DAL) and UAL Corporation (UAUA).
Full analysis of all these stocks is available at http://at.zacks.com/?id=5506.
Here is a synopsis of all five stocks:
We are upgrading our recommendation to Outperform for Expeditors International (EXPD) following second-quarter results. The company's second quarter earnings surpassed the Zacks Consensus Estimate and the year-ago quarter level on strong airfreight and ocean shipping demand.
Yields declined despite an increase in air and ocean volumes, which led to contracting gross margins. However, as the freight is recovering, we expect yields to stabilize at lower and more normal levels. We also expect Expeditors to benefit from a slow and steady economic recovery.
The company's strong balance sheet with no debt is encouraging and provides flexibility for internal growth. Over the long term, the company is poised for growth as it plans to expand its presence and operations internationally and invests in new opportunities and services.
We are downgrading our recommendation on Hudson City Bancorp (HCBK)
Though a solid business model and strong capital levels are upsides, we believe that the elevated levels of credit metrics remain a concern for the company. The recent regulatory moves are also expected to pull down the company's bottom line.
Moreover, the low interest rate environment, anticipated to continue in the upcoming quarters, would restrict the company's margin, thereby dampening investors’ appetite for this stock.
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Sky Traffic Rises in August
August has been a busy month for airliners with traffic showing signs of increase. The economic downturn in 2009 and the oil price hike in 2008 had affected the airline industry during the past two years. Now, with the economic recovery, demand for air travel is increasing from last year's depressed levels.
Airline traffic is measured in billions of revenue passenger miles (RPM), which is the revenue generated for every mile a passenger flies. Unit revenue and capacity rose for most of the airlines in August.
The low-cost carrier Southwest Airlines Co. (LUV) recorded a 6.4% rise in August traffic, the largest growth relative to its peers, on a capacity (or, available seat miles) increase of 3.7% year over year. The month's RPM increased to 7.1 billion compared with 6.7 billion in August 2009.
Load factor (percentage of seats filled with passengers) was 82.3%, up 210 basis points (bps) year over year. The company expects a 15%-16% increase in unit revenue for August, measured by passenger revenue per available seat mile (PRASM), a key metric for airlines.
Our current Zacks Consensus Estimate for Southwest Airlines is 24 cents per share for the third quarter compared with earnings of 3 cents per share in the year-ago quarter. If the company meets the Zacks Consensus Estimate, it would lead to a whopping 715.4% year-over-year growth. Similarly, for fiscal 2010, the current Zacks Consensus Estimate of 72 cents indicates a significant 281.4% year-over-year growth.
We believe Southwest Airlines is well positioned for growth attributable to its cost leadership, strong balance sheet, low cost, flexibility, network optimization, increasing revenue initiatives and hedging. However, discounts on ticket prices, concerns on labor costs, fuel price volatility and technology investment by the company keep us on the sidelines. We are currently maintaining our long-term Neutral rating on Southwest Airlines supported by the Zacks #3 (Hold) Rank.
Delta Air Lines (DAL), the world's largest airline, reported a traffic increase of 1.1% year over year in August based on a 1.2% capacity increase and stable load factor. Domestic traffic declined 0.9% year over year with load factor falling 100 bps. This was partially offset by a 0.3% increase in capacity. However, international traffic increased 4.2% year over year driven by a 2.7% capacity increase and load factor growth of 130 bps to 87.4%.
Our current Zacks Consensus Estimate is 89 cents per share for the third quarter compared with 6 cents per share in the year-ago quarter. For full-year 2010, the current Zacks Consensus Estimate is $2.12, indicating a significant growth of 40.85% year over year.
We remain cautious on Delta Air Lines due to its debt-loaded balance sheet, unionized labor and rising fuel prices. However, we believe the successful integration of the Northwest merger, investments in new products and network, competitive cost structure along with an effort to strengthen the balance sheet will position Delta Air Lines for economic recovery. We are currently maintaining our Neutral rating on Delta Air Lines with the Zacks #3 (Hold) Rank.
August traffic for United Airlines, a wholly owned subsidiary of UAL Corporation (UAUA), increased 2.5% year over year to 11.3 billion. Capacity inched up 1.7% and load factor rose 60 bps to 86.7% from the year-ago period. United Airlines expects PRASM to climb 18%-19% year over year for the month.
Our current Zacks Consensus Estimate for United Airlines is $2.37 per share for the third quarter compared with net loss of 43 cents in the year-ago quarter, indicating a substantial growth of 650.5%. For fiscal 2010, the current Zacks Consensus Estimate is $4.54 compared with net loss of $7.49 in the year-ago quarter. We are currently maintaining our long-term Neutral recommendation on United Airlines supported by the Zacks #3 (Hold) Rank.
Get the full analysis of all these stocks by going to http://at.zacks.com/?id=5507.
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DELTA AIR LINES (DAL): Free Stock Analysis Report
EXPEDITORS INTL (EXPD): Free Stock Analysis Report
HUDSON CITY BCP (HCBK): Free Stock Analysis Report
SOUTHWEST AIR (LUV): Free Stock Analysis Report
UAL CORP (UAUA): Free Stock Analysis Report
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