Market Overview

Short Interest in Southwest Airlines Nearly Doubles

Southwest Airlines (NYSE: LUV) had the only sizable upswing in short interest in the U.S. airline industry between the April 30 and May 15 settlement dates. The number of shares sold short in Delta Air Lines (NYSE: DAL) and U.S. Airways (NYSE: LCC) increased more modestly.

Take a closer look at these three below.

Short interest in Alaska Air Group (NYSE: ALK) rose somewhat during the period too. But JetBlue Airways (NASDAQ: JBLU), Spirit Airlines (NASDAQ: SAVE) and United Continental (NYSE: UAL) saw their short interest decline mildly.

American Airlines remains in bankruptcy, pending completion of its merger with U.S. Airways.

In addition, in early May many short sellers moved out of manufacturer Boeing (NYSE: BA), as its 787 Dreamliner resumed flying after being grounded due to problems with its batteries. The number of Lockheed Martin (NYSE: LMT) shares sold short grew marginally.

Delta Air Lines

This Atlanta-based air transportation company saw short interest rise more than 26 percent to 14.98 million shares. That was on top of an almost 54 percent gain in late April. Though that May 15 figure was the highest number of shares sold short since mid-March, it was less than two percent of the float.

In May, Delta announced resumed dividends and a stock buyback plan. Its market capitalization is more than $15 billion, and the dividend yield is about 1.2 percent. The long-term earnings per share (EPS) growth forecast is more than 24 percent. And the operating margin is better than the industry average.

The consensus recommendation of the analysts who follow the stock that were surveyed by Thomson/First Call is to buy shares of Delta. The mean price target, or where the analysts expect the share price to go, is more than 18 percent higher than the current share price. The stock has not been in that ballpark since 2007.

The share price is 53 percent higher than at the beginning of the year and reached a new multiyear high earlier this month. The stock has outperformed competitors United Continental and U.S. Airways, as well as the Dow Jones Industrial Average, over the past six months.

Southwest Airlines

Shares sold short in this Dallas-based passenger airline operator surged 94 percent during the period to around 34.45 million. That is by far the highest number of shares sold short in the past year, and it represents almost five percent of the float. The days to cover jumped to almost five.

This carrier serves 97 destinations in 41 states and six destinations in the Caribbean and Central America. It has a market cap of near $10 billion. In early May, it released its 2012 Southwest Airlines One Report and it boosted its dividend. The company's long-term EPS growth forecast is more than 34 percent. But the price-to-earnings (P/E) ratio is higher than the industry average.

The polled analysts on average recommend holding Southwest shares. But they believe the shares have some headroom as their mean price target represents more than eight percent potential upside, relative to the current share price. That consensus target would be a new 52-week high.

The share price is up more than 36 percent year-to-date but has faced resistance near $14.50 for the past few weeks. Over the past six months, the stock has outperformed competitor JetBlue, as well as the Dow Jones Industrial Average and the S&P 500.

U.S. Airways

Short interest in this Arizona-based air transport company grew almost seven percent to 50.67 million shares, which was the highest number of shares sold short in at least a year, and it represented more than 31 percent of the float. The days to cover rose from less than seven to more than nine.

The airline is expected to complete its merger with American Airlines in the third quarter, and it was a Jim Cramer pick in May. The company has a market cap of almost $3 billion. The long-term EPS growth forecast is more than 64 percent, and the return on equity is more than 121 percent. The P/E ratio is much less than the industry average.

The analysts' consensus recommendation is to buy shares, and at last check none recommend selling the stock. Their mean price target is more than 19 percent higher than the current share price and would be a level the stock has not seen since late 2007.

U.S. Airways shares are trading more than 29 percent higher year-to-date, even with a five percent pullback from a recent multiyear high. However, the stock has underperformed Southwest and Delta over the past six months, though it has outperformed the broader markets.

Posted-In: 787 Dreamliner alaska air American Airlines Boeing Delta Air Lines JetBlue Airways Lockheed Martin Southwest Airlines Spirit Airlines U.S. Airway united continentalShort Ideas Trading Ideas Best of Benzinga

 

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