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In a report published Tuesday, Wolfe Research analyst Hunter Keay discussed the relationship between annual stock performance and annual margin performance of airline companies. The analyst commented that the annual EBIT margin change is a "great indicator of stock performance."

In the report, Wolfe Research noted, "In each of the past 16 quarters, the stocks of the top four EBIT margin performers on a y/y basis outperformed the stocks of the bottom four margin performers by 15pp, on average, during the quarter."

Keay cited Hawaiian Holdings Inc (NYSE: HA), American Airlines Group Inc. (NYSE: AAL), Southwest Airlines Co. (NYSE: LUV) and Alaska Air Group, Inc. (NYSE: ALK) as the top y/y margin performers in 4Q14. These stocks rose 52% on an average. The bottom performers in the same quarter were Allegiant Travel Company (NASDAQ: ALGT), Copa Holdings SA (NYSE: CPA), Westjet Airline (TSE: WJA) and JetBlue Airways Corporation (NASDAQ: JBLU), the stocks of which rose only 18% on average, the analyst pointed out.

"…in each of the past 16 quarters 70% of the stocks that were in the top four quarterly y/y margin change outperformed the group average, while 66% of the stocks that were in the bottom four quarterly y/y margin change underperformed the group average during the quarter," Keay commented.

"What does this mean for 1Q and 2Q15? Based on our estimates we expect the top four margin performers in 1Q15 will be ALGT, JBLU, UAL, and LUV, and we expect the bottom four margin performers will be CPA, DAL, WJA, and ALK," the analyst added.

Wolfe Research maintained an Outperform rating on Alaska Air Group, Allegiant Travel Company, American Airlines Group, Southwest Airlines, Spirit Airlines, Inc. (NASDAQ: SAVE) and United Continental Holdings, Inc. (NYSE: UAL), while maintaining a Peer Perform rating on Copa Holdings, Delta Air Lines, Inc. (NYSE: DAL), Hawaiian Holdings, JetBlue Airways, Virgin America Inc. (NYSE: VA) and Westjet Airline.

Latest Ratings for HA

Dec 2016Deutsche BankMaintainsBuy
Dec 2016ArgusMaintainsBuy
Nov 2016CitigroupInitiates Coverage OnNeutral

View More Analyst Ratings for HA
View the Latest Analyst Ratings

Posted-In: Wolfe ResearchAnalyst Color Analyst Ratings


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