US Airlines 2Q23 Earnings Preview: Exploring Upsides Amid Lowered Fuel Forecasts and Robust Summer Demand

Raymond James analyst Savanthi Syth updated estimates for U.S. airlines ahead of 2Q23 earnings reports. 

The analyst's 2023E-25E EPS mainly increased primarily due to a lowered fuel price forecast. 

Despite a strong summer, she continues to reflect moderation in demand in the second half of 2023. 

However, she did not model a severe (magnitude or duration) demand downturn. If it transpires, there is likely a partial offset from lower fuel (even at current levels) and still recovering demand. 

The analyst believes airline stocks would perform well in a shorter and shallower downturn.

She sees an upside to American Airlines Group, Inc AAL and continues to rate its Market Perform due to her view of better risk-reward at legacy peers. 

Additionally, while Allegiant Travel Co ALGT has the lowest upside among her Strong Buy- and Outperform-rated stocks, she believes it offers the most significant upside to 3Q23 consensus EPS.

Ahead of Delta Air Lines, Inc's DAL 2023 Investor Day on June 26-27, Syth provided a scorecard of its current 2Q23/2023 guides and long-term financial targets. 

Given the YTD performance and strength in international markets, she believes investors anticipate at least a $0.50 increase in Delta's $5-$6 2023 EPS guide.

Price Actions: AAL shares traded higher by 0.86% at $16.40 on the last check Monday. DAL shares traded higher by 0.66% at $43.15.

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