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Cowen analyst sees airlines bottoming in hereBy Ben Levisohn, Barron's on-line, June 25, 2015 "Cowen’s Helane Becker and team argue that airline stocks like United Continental (UAL), American Airlines (AAL), Southwest Airlines (LUV) and Delta Air Lines (DAL) are getting ready to bottom: Julio Cortez/Associated Press We believe the airline stocks will bottom over the next few weeks as airlines update 2Q15 guidance when they release June and 2Q15 traffic results. We believe unit revenue in June improved from May’s disappointing, but expected, decline of 5.9%…We expect June to be better than May and then July and the rest of the year to be sequentially better… We believe United Airlines (UAL, $54.46, Outperform, PT $75) has the most leverage among the legacy airlines. Catalysts for the shares include potentially instituting a dividend (the other three legacy airlines pay a dividend), inclusion in the S&P 500 and better y/y unit revenue numbers. Delta Air Lines (DAL, $42.66, Outperform, PT $55) has actually outperformed American (AAL, $42.24, Market Perform, PT $45) and United (it’s down less year-to-date) mostly because it is done with all adjustments related to its merger and can now focus on delivering what is arguably the best product in the market. And Southwest Airlines (LUV, $34.32, Outperform, PT $45) has an opportunity to grow the airline from Dallas Love Field, as well as into international markets, over the next five to ten years that should drive significantly higher revenue. We believe when its international growth is fully done, Southwest will have 200 daily departures from at least five US airports to 50 cities in Canada, Mexico, the Caribbean, Central America and Northern South America. I just want to point out that Barron’s Jack Hough went full bull on the airlines over the weekend. Shares of United Continental have gained 0.4% to $54.70 at 9:34 a.m. today, while American Airlines has risen 0.9% to $42.63, Delta Air Lines has advanced 0.6% to $42.91, and Southwest Airlines is up 0.9% at $34.66." |
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