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Should You Look Past Mixed Earnings & Play Airlines ETF?

Sanghamitra Saha
·4 min read

It’s been around three weeks since Delta Air Lines Inc. DAL kick started the fourth-quarter earnings season for the airline space. Overall, the season has been mixed for the industry. The sector still has a way to go before it can reach the pre-pandemic level.

However, the pureplay airlines ETF U.S. Global Jets ETF JETS has gained 23% past month (as of Jan 27, 2022). In fact, the fund beat the S&P 500 (up 7.3%) in the past one-month period.

This makes JETS a great bet to make the most of recovery in airline industry. Still, we need to pay attention to the earnings picture of the industry. Let’s delve a little deeper.

Inside the Headlines

On Jan 13, Delta Air Lines DAL kick-started the fourth-quarter 2022 earnings season for the airline space. This Atlanta-based carrier reported better-than-expected earnings per share and revenues. Delta’s fourth-quarter 2022 earnings (excluding 19 cents from non-recurring items) of $1.48 per share beat the Zacks Consensus Estimate of $1.29 per share.

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DAL reported earnings of 22 cents per share a year ago, dull in comparison to the current scenario, as air-travel demand was not so buoyant then. Delta reported revenues of $13,435 million, which also surpassed the Zacks Consensus Estimate of $13,030.3 million.

United Airlines Holdings, Inc. UAL reported better-than-expected fourth-quarter 2022 results, wherein earnings and revenues outperformed the Zacks Consensus Estimate. Quarterly earnings of $2.46 per share beat the Zacks Consensus Estimate of $2.07. In the year-ago quarter, UAL incurred a loss of $1.60 per share when air-travel demand was not as buoyant as in the current scenario. The fourth quarter of 2022 was the third consecutive profitable quarter at UAL since the onset of the pandemic. Operating revenues of $12,400 million beat the Zacks Consensus Estimate of $12,230 million.

JetBlue Airways’ JBLU fourth-quarter 2022 earnings (excluding 15 cents from non-recurring items) of 22 cents per share beat the Zacks Consensus Estimate of 19 cents. Results were aided by strong air-travel demand. In the year-ago quarter, JBLU incurred a loss of 36 cents per share. Operating revenues of $2,415 million climbed 31.68% year over year and beat the Zacks Consensus Estimate of $2,407.5 million. The double-digit year-over-year jump reflects improving air-travel demand.

Alaska Air Group Inc. ALK reported mixed fourth-quarter 2022 results, wherein earnings outperformed the Zacks Consensus Estimate but revenues missed the same. Quarterly earnings of 92 cents per share beat the Zacks Consensus Estimate of 90 cents. The bottom line surged more than 100% year over year. Operating revenues of $2,479 million missed the Zacks Consensus Estimate of $2,504.4 million.

American Airlines’ AAL fourth-quarter 2022 earnings (excluding 3 cents from non-recurring items) of $1.17 per share surpassed the Zacks Consensus Estimate of $1.14 per share despite higher costs. In the year-ago quarter, AAL incurred a loss of $1.42 per share. Operating revenues of $13,189 million increased 39.9% year over year, reflecting upbeat air-travel demand. However, the top line missed the Zacks Consensus Estimate of $13,218.7 million.

Southwest Airlines Co. LUV reported fourth-quarter 2022 loss of 38 cents per share, wider than the Zacks Consensus Estimate of a loss of 3 cents. In the year-ago reported quarter, LUV had reported earnings of 14 cents per share. Revenues of $6,172 million lagged the Zacks Consensus Estimate of $6,270.9 million but improved 22.2% year over year.

ETF JETS in Focus

The $2.15-billion-fund JETS holds about 30 stocks in its portfolio and is concentrated on a few individual securities. All the above-mentioned stocks get a place in the portfolio. The product charges 60 bps in fees.

Bottom Line

While the earnings picture is yet to improve fully, some companies beat on estimates. This shows a ray of hope for faster recovery in the coming days. If there is a steady improvement in the coronavirus scenario globally, one can surely see a jump in this otherwise-undervalued product JETS. Rise in energy prices is still a concern.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Delta Air Lines, Inc. (DAL) : Free Stock Analysis Report

United Airlines Holdings Inc (UAL) : Free Stock Analysis Report

Southwest Airlines Co. (LUV) : Free Stock Analysis Report

JetBlue Airways Corporation (JBLU) : Free Stock Analysis Report

American Airlines Group Inc. (AAL) : Free Stock Analysis Report

Alaska Air Group, Inc. (ALK) : Free Stock Analysis Report

U.S. Global Jets ETF (JETS): ETF Research Reports

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