Major U.S. airlines are scheduled to report first-quarter earnings in the coming days, with investors hoping for good news about peak summer travel amid a recent slowdown in bookings.
Another point of interest will be second-quarter revenue guidance, analysts at BofA Securities said in a note Tuesday.
Weekly airline bookings have slowed since mid-March, according to BofA data, leading the analysts to become “a bit more cautious” on current-quarter revenues.
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Jefferies analyst Sheila Kahyaoglu struck a more optimistic tone, at least for the short term. First-quarter results “will point to the continued strength in the demand environment” into the summer, she said.
Areas of investor focus include whether demand for leisure travel will hold heading into the second half of the year amid economic instability, and whether there will be improvement in the pace of corporate travel, Kahyaoglu said.
“We remain cautious on a weakening consumer into [the second half of the year], with elevated 2023 costs and elevated capex,” Kahyaoglu said.
Delta Air Lines Inc.
DAL,
kicks off earnings season for U.S. airlines before the bell on Thursday. A call with analysts to go over the results will follow.
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The FactSet consensus calls for adjusted earnings of 31 cents a share on sales of $12 billion for Delta in the first quarter, which would contrast with an adjusted loss of $1.23 a share on sales of $9.3 billion in the year-ago quarter.
Delta is a top pick at Jefferies. The Atlanta-based airline “stands out in our coverage as best in class as the airline will be a cash generator through 2025 [estimated] (unlike [United] and [Southwest]) and has a clear path to returning to an investment grade credit rating (unlike [American]).”
United Airlines Holdings Inc.
UAL,
is slated to report first-quarter earnings after the bell next Tuesday, followed by a call with analysts Wednesday morning.
American Airlines Group Inc.
AAL,
is scheduled to report on Thursday, and Southwest Airlines Co.
LUV,
will be the last U.S. major airline to report, updating investors on April 27.
Last month, United told Wall Street to brace for a first-quarter loss. FactSet consensus for United calls for a loss of 74 cents a share on sales of $11.4 billion, which would compare with a loss of $4.24 a share on sales of $7.6 billion in the year-ago quarter.
The BofA analysts, led by Andrew Didora, said that domestic sales have slowed more than international sales since mid-March.
“There are generally more off-peak leisure periods between now and Memorial Day, so we think there is greater risk in the domestic, leisure-oriented airlines into [the second quarter of 2023],” they said.
Investing in airlines can be challenging even in the best of times, “but throw in fears about a looming recession and the sector can feel quite lonely,” Barclays analysts, led by Brandon Oglenski, said in their note Tuesday.
Beyond the potential impact on earnings from a slower economy, however, “we still see the U.S. airline industry benefiting from long-term travel demand growth,” they said.
“While understandable that investors would seek more defensive sectors compared to quite cyclical airlines, we suspect the next recession will be less negative for airlines than some fear,” the Barclays analysts said.
The U.S. Global Jets exchange-traded fund
JETS,
is down about 9% in the past 12 months, compared with losses of around 7% for the S&P 500
SPX,
in the same period.
This post was originally published on Market Watch
