Market Overview

U.S. Airways Sees Short Interest Swell (DAL, LUV, UAL)

Short sellers largely retreated from U.S.-based airline stocks between the October 15 and October 31 settlement dates.

However, the number of shares sold short in U.S. Airways (NYSE: LCC) rose significantly in the period.

Note that American Airlines remains in bankruptcy, pending its merger with U.S. Airways. The merger had been delayed by the U.S. Department of Justice, but the airlines have now reached a settlement with the department that will allow the merger to proceed.

The short interest in SkyWest (NASDAQ: SKYW) grew more modestly in late October, while United Continental (NYSE: UAL) saw little change in its short interest, relative to the previous period.

However, Alaska Air Group (NYSE: ALK) and Delta Air Lines (NYSE: DAL) each saw a sizable drop in the number of their shares sold short by the end of the month.

Short interest dwindled too in Allegiant Travel (NASDAQ: ALGT), JetBlue Airways (NASDAQ: JBLU), Republic Airways (NASDAQ: RJET), Southwest Airlines (NYSE: LUV) and Spirit Airlines (NASDAQ: SAVE).

Further, short interest in manufacturer Boeing (NYSE: BA) also declined in the latter weeks of October, while that in Lockheed Martin (NYSE: LMT) was little changed.

Below is a quick look at how Alaska Air, Delta Air Lines and U.S. Airways have fared and what analysts expect from them.

See also: Solar Stocks Shine as Short Interest Surges

Alaska Air Group

The number of shares sold short in this Seattle-based regional airline dropped to about 1.64 million, less than half the number in the previous period, and the lowest level of short interest in the past year. More than two percent of float was held short, and the days to cover fell to less than three.

Alaska Air posted better-than-expected third-quarter results. The company has a market capitalization of more than $4 billion and a dividend yield near 1.1 percent. The long-term earnings per share (EPS) growth forecast is more than 14 percent, and the return on equity is more than 30 percent.

Nine of the 14 analysts who follow the stock that were surveyed by Thomson/First Call recommend buying shares, five of them rating the stock at Strong Buy. Their mean price target, or where analysts expect the share price to go, is only about six percent higher than the current share price. That would be a new multiyear high, though.

The share price reached a multiyear high on Tuesday, and it is up more than 17 percent in the past month. The stock has underperformed JetBlue and Southwest, though it has narrowly outperformed the S&P 500, over the past six months.

Delta Air Lines

This Atlanta-based air transportation company saw short interest shrink from about 32.82 million shares in the previous period to more than 34.62 million by the end of the month. That was about three percent of the float. The number of shares sold short has been dwindling since mid-September.

During the period, Delta's strong earnings report pleased investors. Its market cap is almost $24 billion, and the dividend yield is about 0.9 percent. The long-term EPS growth forecast is about 22 percent, and the operating margin is better than of United Continental. Note that Delta's return on equity is in the red.

All but one of the 14 surveyed analysts recommend buying shares of Delta, with five of them rating the stock at Strong Buy. Their mean price target is more than eight percent higher than the current share price, and it would be a new multiyear high as well.

The share price is more than 16 percent higher than a month ago and reached a new multiyear high on Tuesday. The stock has not only outperformed competitors United Continental and U.S. Airways over the past six months, but the Dow Jones Industrial Average too.

See also: Gilead Sciences Leads In Rising Short Interest Among Biotechs

U.S. Airways

Short interest in this Arizona-based air transport company rose about 11 percent to 16.35 million shares, taking back most of the decline in the previous period. That end of the month figure represented more than eight percent of the float. The days to cover fell to less than three for the first time since February.

Net income declined in the third-quarter due to higher taxes. The company has a market cap of more than $4 billion. The long-term EPS growth forecast is less than 10 percent, and the return on equity is more than 53 percent. The price-to-earnings (P/E) ratio is less than the industry average.

Of the 11 analysts surveyed, six recommend buying shares and only one rates the stock at Underperform. Their mean price target is more than 13 percent higher than the current share price. That target would be a level the stock has not seen since late 2007.

U.S. Airways shares have climbed more than 14 percent in the past month and are more than 37 percent higher than six months ago. However, the stock has underperformed competitor Delta over the past six months, though it has outperformed the broader markets.

At the time of this writing, the author had no position in the mentioned equities.

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Posted-In: alaska air American Airlines Boeing Delta Air Lines JetBlue Airways Lockheed MartinShort Ideas Trading Ideas Best of Benzinga

 

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