Airlines Earnings Mixed: What Lies ahead of ETF?

It’s been more than three weeks since Delta Air Lines Inc. DAL kick started the second-quarter earnings season for the airline space. Overall, the season has been mixed for the industry. The sector still has to traverse a long way before it can reach the pre-pandemic level.

However, the pureplay airlines ETF U.S. Global Jets ETF JETS has gained 8.4% past month (as of Aug 3, 2022). In fact, the fund beat the S&P 500 (up 8.6%) in the past one-month period.

This makes JETS a great bet for vaccine rollout and economic optimism. Still, we need to pay attention to the earnings picture of the industry. Let’s delve a little deeper.

Inside the Headlines

Delta Air Lines’ DAL second-quarter 2022 earnings (excluding 29 cents from non-recurring items) of $1.44 per share fell short of the Zacks Consensus Estimate of $1.71. Escalated operating expenses induced the earnings miss.

Delta’s revenues came in at $13,824 million, which not only beat the Zacks Consensus Estimate of $13,608.9 million but also soared 94% from the year-ago quarter’s figure as air-travel demand rebounded from the pandemic lows.The uptick in air-travel demand in the United States can be gauged from the fact that 75.9% of second-quarter 2022 passenger revenues came from the domestic markets.

United Airlines’ UAL second-quarter 2022 earnings (excluding 43 cents from non-recurring items) of $1.43 per share fell short of the Zacks Consensus Estimate of $1.86. Operating revenues of $12,112 million marginally beat the Zacks Consensus Estimate of $12,033.7 million. Revenues increased more than 100% year over year owing to upbeat air-travel demand. The optimistic air-travel demand scenario is also evident from the fact that total operating revenues increased 6.2% from second-quarter 2019 (pre-coronavirus) levels.

American Airlines’ AAL second-quarter 2022 earnings (excluding 8 cents from non-recurring items) of 76 cents per share fell short of the Zacks Consensus Estimate of 79 cents. Escalated operating expenses induced the earnings miss. Operating revenues of $13,422 million skyrocketed 79.5% year over year and also surpassed the Zacks Consensus Estimate of $13,409.8 million. This massive year-over-year jump reflects upbeat air-travel demand. Buoyant air-travel demand is also reflected by the fact that total operating revenues increased 12.2% from the second-quarter 2019 (pre-coronavirus) levels despite operating at an 8.5% lower capacity.

Low-cost carrier Southwest Airlines Co. LUV reported better-than-expected second-quarter 2022 results, wherein both earnings and revenues outperformed the Zacks Consensus Estimate. Quarterly earnings of $1.30 outpaced the Zacks Consensus Estimate of $1.17. Moreover, the bottom line improved by more than 100% year over year. Operating revenues of $6,728 million outperformed the Zacks Consensus Estimate of $6,719.1 million and jumped 67.9% year over year..

JetBlue Airways JBLU incurred a second-quarter 2021 loss (excluding 11 cents from non-recurring items) of 47 cents per share, comparing unfavorably with the Zacks Consensus Estimate of a loss of 11 cents. Higher operating expenses hurt the bottom line. This wider-than-expected loss disappointed investors. Consequently, shares of JBLU declined 6.4% on Aug 2.

Operating revenues of $2,445 million surged 63.1% year over year but fell short of the Zacks Consensus Estimate of $2,468.3 million. This massive year-over-year jump reflects improving air-travel demand.

Alaska Air Group ALK reported better-than-expected second-quarter 2022 results, wherein both earnings and revenues outperformed the Zacks Consensus Estimate. Quarterly earnings of $2.19 per share (excluding $1.10 from non-recurring items) beat the Zacks Consensus Estimate of $1.94. The bottom line surged more than 100% year over year.

Operating revenues of $2,658 million outperformed the Zacks Consensus Estimate of $2,590.3 million. The top line surged 74% year over year with passenger revenues accounting for 90.9% of the top line and soaring 79% owing to continued recovery in air-travel demand.

ETF in Focus

The $2.55-billion-fund holds about 30 stocks in its portfolio and is concentrated on a few individual securities. All the above-mentioned stocks get a place in the portfolio. The product charges 60 bps in fees.

Bottom Line

While the earnings picture is still moderately gloomy, some companies beat on estimates. This shows a feeble hope for recovery in the coming days. If there is a steady improvement in the coronavirus scenario globally, one can surely see a jump in this otherwise-undervalued product JETS. However, any kind of worsening in the COVID situation may harm the fund over the medium term.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Delta Air Lines, Inc. (DAL) : Free Stock Analysis Report
 
United Airlines Holdings Inc (UAL) : Free Stock Analysis Report
 
Southwest Airlines Co. (LUV) : Free Stock Analysis Report
 
JetBlue Airways Corporation (JBLU) : Free Stock Analysis Report
 
American Airlines Group Inc. (AAL) : Free Stock Analysis Report
 
Alaska Air Group, Inc. (ALK) : Free Stock Analysis Report
 
U.S. Global Jets ETF (JETS): ETF Research Reports
 
To read this article on Zacks.com click here.
 
Zacks Investment Research