More Saying 'Aloha' To Hawaii Earns Airline An Upgrade From Argus

Argus has upgraded Hawaiian Holdings, Inc. HA to Buy from Hold after strong demand for flights to Hawaii and low fuel costs led the airline to nearly double its second quarter earnings.

"The company is also benefiting from limited capacity growth on Hawaii-to-West Coast flights, as well as from expanded service to Japan and the purchase of new fuel-efficient aircraft," analyst David Coleman wrote in a note.

Hawaiian Holdings expects more moderate currency headwinds in the second half of 2016 and appears likely to reach an acceptable settlement with its pilots' union. In addition, it continues to pay down debt and buy back stock.

Based on better-than-expected second quarter results, Coleman raised his 2016 EPS estimate to $4.92 from $4.70, above the consensus estimate of $4.79.

Coleman expects capacity growth of 3-5 percent in 2016 and projects revenue per available seat mile to be flat to moderately positive this year. Though the analyst expects cost per available seat mile to benefit from current lower fuel costs, he is looking for fuel costs to rise in 2017.

The airliner's shares have shined over the past three months, rising 5.1 percent and beating S&P 500's growth of 4 percent. The shares have also outperformed over the past year, with a gain of 91.5 percent, compared to a gain of 2.3 percent for the benchmark index. The beta on the stock is 1.32.

"Given the company's near-term outlook, we believe that HA shares are attractively valued at 9.4 times our 2016 EPS estimate, below the peer average of 11.4," Coleman added.

At the time of writing, shares of the airline rose 1.33 percent to $45.82. Coleman has a price target of $51, representing a potential upside of 13 percent over Monday's close of $45.22.