Ally Schmidt

In this series, we’ll explore the key highlights of the major US airlines’ 4Q15 earnings. In 4Q15, the stocks of most legacy players outpaced those of regional carriers.

Wynn Resorts opened its $4.1 billion Wynn Palace on August 22, 2016, and this may have directly contributed to Macao’s casino industry recovery in August.

Delta Air Lines’ (DAL) total traffic fell due to a computer outage. For August 2016, Delta’s traffic fell by 2.8% as compared to the 0.5% capacity growth.

In this part of the series, we’ll look at the outlook for General Dynamics’ individual business segments. General Dynamics has four major business segments.

Growing capacity is necessary for revenue growth. However, capacity expansion that exceeds demand growth can lead to declining utilization.

Delta Air Lines (DAL) expects to generate more than $7 billion–$8 billion of operating cash flow and ~$4 billion–$5 billion of free cash flow. It plans to reduce its adjusted net debt to $4 billion by 2020.

Out of the 18 analysts tracking Southwest Airlines (LUV), 11 analysts (61.1%) have a “buy” recommendation on the stock versus 71% analysts that had a “buy” recommendation on Southwest in 2Q16.

Adding newer destinations Alaska Air Group (ALK) added a number of new routes in the second quarter of 2015, such as: Boise to Reno Eugene to San Jose, California Los Angeles to Baltimore Los Angeles to Gunnison–Crested Butte Los Angeles to Monterey Los Angeles to San Jose, Costa Rica Portland to Austin Seattle to Charleston […]

Alaska Air Group saw the highest surge in traffic demand and was the leader in capacity growth, with a 6.4% YoY increase in its capacity in July 2015.

Of the 31 analysts rating Priceline’s stock after the company’s 3Q17 earnings report, 19.4% (six analysts) have issued a “strong buy” rating and 58.1% (18 analysts) have issued a “buy” rating.

2016 has been the worst start for the S&P 500 in the past eight years. US airlines also saw a bad start. The Dow Jones U.S. Airline Index has fallen 4% YTD.

SPY closed almost flat on March 22. It recovered after an initial sell-off following the terror attack in Brussels. This is common after the uncertainty of an event.

In mid-September 2016, the Hawaiian Airlines pilot union opened a strike operations center to operate in the event of a strike.

Alaska Air Group’s (ALK) consensus 12-month target price is $80.55, which indicates a 15.2% return potential on October 10, 2016.

The Sikorsky segment saw a major win from India’s navy, which placed an order for 16 S-70B Seahawk naval helicopters.

Priceline doesn’t offer any cash dividends on its common stock since it prefers to retain future earnings to finance the expansion of its business.

Delta Air Lines (DAL) reported its earnings on October 14, 2015. The earnings call caused greater movement in one of Delta’s key vendors—Boeing (BA).

Airline capacity utilization is measured using the passenger load factor, which is calculated by dividing traffic numbers by capacity numbers.

Since airlines across the industry have been forecast to beat record profits achieved in 2015, consumers have expected a further fall in airfares.

Of the 29 analysts tracking Marriott International (MAR), 17.0% (five analysts) have a “strong buy” recommendation for the stock.

According to a study by Expedia, airfares fell by about 5% in 2015. Despite this decline, passenger complaints are on the rise. Many consumer leaders also lobbied for airfare reductions.

Unemployment rate The unemployment rate indicates the percentage of the labor force that is currently unemployed but actively seeking employment. In 2000, the unemployment rate in Macao peaked at 7%. Since then, tremendous growth in the gaming industry has helped reduce employment in Macao. Unemployment averaged 3.8% between 1996 and May 2017. Between January and […]

For November 2016, visitor arrivals remained unchanged as compared to November 2015 and fell 3.4% month-over-month to 2.6 million visitors.

For 3Q16, analysts are estimating Priceline’s revenues to grow by 16.6%, which would be higher than the 12% growth the company saw in the second quarter.

FedEx continues to see growth in the global economy. It expects the US GDP to grow by 2.4% in 2015 and by 2.6% in 2016, driven by increased consumer spending.

According to a Bloomberg consensus, JetBlue Airways is expected to see earnings per share (or EPS) of $0.6 in the quarter, compared to EPS of $0.58 in 3Q15.

According to Bloomberg’s consensus, out of the 14 analysts tracking American Airlines (AAL), 71.4% have “buy” recommendations.

With total sales of $45,358 million in 2013, Lockheed Martin is the largest defense contractor in the world. The other major defense contractors in the world include The Boeing Company and Raytheon Company.

In the last week of June 2017, Qatar Airways’ CEO, Akbar Al Baker, disclosed the carrier’s interest in buying a 10% stake worth $808 million in American Airlines through the open market.

In 2015, most airline stocks have fallen, and the NYSE ARCA Airline Index (XAL), which is composed of the major US airline stocks, has also tumbled as much as 13.5% year-to-date.

In 2013, Lockheed Martin clocked revenues of $45.4 billion. Of its revenues, 82% come from the U.S. government, around 17% from international customers, and 1% from other U.S. commercial customers.

For 2Q16, analysts are estimating 4.2% revenue growth for Alaska Air Group (ALK), which is slower than the 6.2% growth in 1Q16.

The Trans-Pacific Partnership is expected open cross-border trade between member nations by increasing imports and exports and cutting taxes and tariffs.

May revenue marks a high point According to the Gaming Inspection and Coordination Bureau, Macao’s gross gaming revenue has risen 23.7% YoY (year-over-year) to 22.7 billion Macao patacas, or $2.8 billion. The revenue growth beat analysts’ estimate by a wide margin. Analysts had forecast Macao’s May revenue to grow 16.5% YoY. May marks the tenth consecutive […]

Priceline’s consensus 12-month target price is $1,479.55, which indicates an 11.5% return potential.

Analysts are estimating 2Q16 revenue of ~$1.7 billion for JetBlue Airways (JBLU), which is a year-over-year increase of 2.2%.

This introduction to Boeing (BA) provides basic information about the aerospace manufacturing leader’s products, services, and third-quarter performance.

American Airlines (AAL) stock rose almost 0.94% on September 12, the day of its traffic release.

Analyst upgrades Delta Air Lines (DAL) has already received four downgrades since its traffic release yesterday. Imperial Capital reduced its target price from $54 to $50, Deutsche Bank has reduced its target price from $62 to $59, Cowen & Co. has reduced its target price from $66 to $60, and UBS has reduced its target […]

Online travel industry leaders like Priceline (PCLN) and Expedia (EXPE) have a mixed relationship. They’re partners as well as competitors.

Raytheon’s Integrated Defense Systems segment saw marginally lower sales during the year due to lower sales across most of its major programs such as the Patriot program.

Among the seven major carriers, most analysts seem to favor Delta Air Lines (DAL), which has a “buy” rating from 87.5% of the analysts.

UPS’s Domestic Package segment provides an array of guaranteed ground and air package transportation services, depending on the customer’s need.

Spirit Airlines’ EBITDA (earnings before interest, tax, depreciation, and amortization) margin is expected to fall to 24.2% in 2016, compared to 26.8% in 2015.

Out of the 14 analysts tracking American Airlines (AAL), 50% have a “buy” recommendation on the stock as compared to the 71.4% that had a “buy” rating in 2Q16.

Delta Air Lines (DAL) stock fell 3.5% after its traffic release on September 5, 2017. The negativity has spread to other players.

Decreasing load factors across the airline industry mean that airlines are not able to fill up their seats as fast as they are adding seats. This justifies investor fears of overcapacity.

General Dynamics’ total backlog grew from $45.9 billion at the end of 2013 and to $72.4 billion at the end of 2014. This was a whooping 58% increase.

Stocks of major Macao casinos have been on the rise since September 2016 when casino revenues started rebounding.

Delta Air Lines (DAL) reported its 2Q16 results on July 14, 2016. The company’s revenue fell by 2.4% YoY (year-over-year) to $10.5 billion.

Carnival Corporation’s 4Q15 financial report came better than most had expected. Despite a fall in revenue, CCL saw a strong surge in its earnings.

For 1Q17, analysts are estimating Hilton’s (HLT) revenue to fall 25% to $2.1 billion.

The Boeing Company updated its guidance for 2015. It expects revenues to end in the range of $95 billion–$97 billion by the end of 2015 compared to its previous outlook of $94.5 billion–$96.5 billion.

So far in September, Boeing has managed to increase investor wealth by 4.2%.

The demand for air travel experienced considerable growth in the month of August, driven by traditional vacation travel as well as lower fares of major air carriers.

For October, SAVE was ranked third on the metric according to the Department of Transportation. That’s a huge improvement since Spirit has historically been last.

Hotels make up a significant part of Ctrip’s revenues—39% of total revenues in 2Q16—similar to OTA peers Priceline, Expedia, and TripAdvisor.

JetBlue is in its growth phase and prefers to utilize its cash receipts to fund business growth and reduce debt levels. JetBlue currently pays no dividends.

Crude oil is trading below $50 per barrel, one of its lowest recent prices, and it is expected to take some time before it recovers, given the huge oversupply.

In November 2017, Southwest Airlines’ (LUV) traffic grew 3.4% year-over-year (or YoY). This growth was higher than its capacity growth of 2.5% YoY in the same month.

The airline industry is capital-intensive, with high levels of depreciation and amortization and varying degrees of debt and operating leases. To neutralize these factors, we use the EV-to-EBITDA ratio to value airline stocks.

Delta Air Lines (DAL) is the third largest domestic airline in the US. The company serves more than 170 million customers each year across the globe.

On April 4, 2016, Alaska Air Group (ALK) announced its acquisition of Virgin America for $57 per share in cash, which amounted to $2.6 billion.

Visitor arrivals increase In May 2017, visitor arrivals rose 3.7% YoY (year-over-year) to 2.6 million visitors. However, month-over-month, visitor arrivals fell 6.3%. Visitor arrivals have been improving since September 2016, except in February 2017, when they fell 5.6% to 2.5 million visitors. In the first five months of the year, visitor arrivals in Macao rose 6.3% […]

Effective January 2015, FedEx changed its pricing policy for all of its FedEx Ground packages less than 3 cubic feet to a “dimensional weight pricing” mechanism.

Honeywell’s Aerospace segment is a global provider of innovative solutions for regional and business aviation, defense systems, and air and other transportation systems.

Right now, 36.8% of the analysts tracking Southwest Airlines (LUV) stock have given it “strong buy” ratings. Another 52.6% of analysts have “buy” ratings on the stock.

Currently, CCL’s forward EV/EBITDA ratio stands at 10.4x. CCL enjoyed its highest valuation of 63x during September 2006. It reached its lows of ~5x in November 2008.

FedEx Ground is being driven by the booming growth in e-commerce, and it contributed to 35% of the company’s revenues but 44% of its profits.

At present, 35.3% of the analysts tracking the Southwest Airlines (LUV) stock have “strong buy” ratings, another 35.3% have “buy” ratings, and 29.4% have “hold” ratings on the stock.

JetBlue (JBLU) has a strong presence on the East Coast with a major presence in New York, Boston, and the Caribbean. The airline has a much less commanding presence on the West Coast.

General Dynamics’ stock outperformed the index at all times. In the past year, it gave its shareholders 38% returns. The index returned 15% to shareholders.

The economic upturn since 2009 has improved growth prospects for the courier companies. This coupled with improving industry margins has led to improving industry valuations.

Passenger yield declined by 8% year-over-year for August 2015 to 15.3 cents from 16.6 cents. This is the highest decline since the start of the year.

Currently, American Airlines (AAL), Southwest Airlines (LUV), and Alaska Air Group (ALK) are all trading at ~5x their forward EV-to-EBITDA multiples.

Inflation rate Inflation is an overall rise in the price of goods and services in an economy, leading to the fall in purchasing power of money. Macao’s annual inflation, as measured by the composite consumer price index, rose 0.95% YoY (year-over-year) in May 2017, higher than the 0.8% increase seen in April. Macao’s inflation has […]

UPS has addressed complex supply chain issues such as transportation, distribution, and international trade and brokerage services by offering a variety of services.

Carnival has a low valuation compared to its peers. Analysts are expecting the lowest EBITDA growth for CCL—related to peers RCL and NCLH—in the next four quarters.

Priceline (PCLN) and Expedia (EXPE) have been on an acquisition spree. They’ve spent more than $7.6 billion collectively on acquisitions over the last two years.

The Intelligence, Information and Services segment was almost in line with last year. So were the operating income and margins, all of which saw marginal declines.

UPS has the fourth-highest market share in US freight. As of 2014, UPS’s freight segment had a market share of 8%. FedEx enjoys the highest market share.

In this article, we will see how Aerospace Systems, L-3’s largest business segment, performed in 3Q14.

UPS expects package volumes during the 2015 holiday season to rise by 10%. On December 22, UPS expects to ship 36 million packages—double its daily average.

JetBlue Airways Corporation (JBLU) is the only airline stock in the industry to have gained more than 50% in 2015.

UPS expects its acquisition of Coyote Logistics to provide high-tech light entry into the truckload brokerage market and help manage its backhaul capacity.

For 3Q16, TRIP’s revenue per shopper fell 12%. This is slightly better than the 24% decline seen in 1Q16 and the 19% decline seen in 2Q16.

RQPR rose 2.1% in 2015 to 1.5 euros compared to 1.4 euros in 2014. For the nine months ended in September 2016, RQPR fell 6.0%.

In this series, we’ll assess Boeing’s (BA) key indicators for 4Q16. We’ll look at analyst estimates for BA’s 4Q16 performance and assess whether the indicators justify the estimated earnings results.

The most recent phase of consolidation that began in 2005 has seen 13 airline mergers and acquisitions. Four of these deals are worth special mention because they changed the face of the industry.

Macao’s shift from VIP gaming to the mass gaming market and non-gaming revenue is expected to benefit Macao in the long run.

Raytheon is a global technology leader and US defense contractor. It primarily develops and manufactures weapons and military and commercial electronics.

Southwest Airlines’s (LUV) current valuation is slightly lower than its average valuation of 4.8x since October 2008.

Just a few days ago, we wrote about how Trump had received very little support from the travel industry. Now that he’s been elected, what’s next?

Alaska Air Group (ALK) currently has the highest forward EV-to-EBITDA multiple of 6.6x.

According to Reuters, of the 17 analysts tracking American Airlines (AAL), 23.5% (or four) have “strong buy” ratings on the stock.

For 1Q16, analysts estimate American Airlines’ revenues to decline by 4% to $9.4 billion and then to slow to 2% and 0.5% in 2Q16 and 3Q16, respectively.

As of December 10, 2015, the Macao casino industry’s valuation stands at 12.9x. This is close to the industry average valuation of 12.5x in April 2008.

New inventory The new integrated resorts opened last year by Melco Resorts & Entertainment (MLCO) and Wynn Resorts (WYNN), and those slated to open in the next two years, are set to increase Macao’s hotel inventory by more than a third. At the end of April, Macao had approximately 37,000 rooms. This figure is expected […]

Despite its fall in 3Q16, Spirit Airlines’ stock continues to be the best performing airline stock in 2016. The stock has risen almost 9% year-to-date.

Delta Air Lines (DAL) reported its fourth quarter 2016 results on January 12, 2016. The airline’s revenue fell.