AAG(AAL) ZACKS·2025-01-09 08:26Industry Overview - The Zacks Airline industry is engaged in transporting passengers and cargo globally, utilizing a fleet of mainline jets and regional planes, supported by regional airline subsidiaries and third-party carriers [3] - The industry includes both legacy carriers and low-cost players, with its well-being closely tied to the overall economy [4] - The demand for air travel is currently strong, with a focus on boosting cargo revenues being a positive trend [4] Industry Performance and Valuation - The Zacks Transportation - Airline industry has gained 33.5% over the past year, outperforming the S&P 500's rise of 26.9% and the broader sector's decline of 1.6% [11] - The industry's forward 12-month price/sales (P/S) ratio is 1.15X, below the S&P 500's 5.47X and the sector's 1.79X [12] - Over the past five years, the industry's P/S ratio has ranged from 0.41X to 1.16X, with a median of 0.67X [12] Key Factors Driving the Industry - Upbeat passenger volumes, particularly in leisure travel, have driven strong top-line performance for airlines, with business travel also showing a positive comeback [5] - Low fuel costs, driven by a 14% decline in oil prices from July to September 2024, are benefiting the industry's bottom-line growth [6] - Labor costs are increasing due to post-COVID-19 labor shortages, leading to pay-hike deals and higher expenses for airlines [7] Earnings and Stock Performance - The Zacks Airline industry carries a Zacks Industry Rank 51, placing it in the top 20% of Zacks industries, indicating bright near-term prospects [8] - The industry's earnings estimate for 2025 has improved by 7.8% since August 2024, reflecting analyst optimism about earnings growth potential [9] - The top 50% of Zacks-ranked industries outperform the bottom 50% by more than 2 to 1 [9] Recommended Stocks - American Airlines (AAL): Based in Fort Worth, TX, AAL is benefiting from increased air travel demand and low fuel costs, with a 16.8% increase in the Zacks Consensus Estimate for 2025 earnings over the past 60 days [13] - Alaska Air Group (ALK): Based in Seattle, WA, ALK is supported by rising air travel demand and a shareholder-friendly approach, with a 10% upward revision in the Zacks Consensus Estimate for 2025 earnings over the past 60 days [14] - United Airlines (UAL): Based in Chicago, IL, UAL is experiencing strong air travel demand and benefits from new routes and an environmentally friendly approach, with a 3.5% upward revision in the Zacks Consensus Estimate for current-year earnings over the past 60 days [15]