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Airlines Earnings Mixed: What Lies ahead of ETF?

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It’s been more than two weeks since Delta Air Lines Inc. DAL kick started the first-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 was up 3.1% past week, down 1.3% in the past month and up 21.1% in the past three-month period. In fact, the fund beat the S&P 500 (up 8.6%) in the past three-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 first-quarter 2021 loss (excluding $1.70 from non-recurring items) of $3.55 per share was wider than the Zacks Consensus Estimate of $3.08 as well as the first-quarter 2020 loss of 51 cents. This was the fifth successive quarterly loss incurred by this Atlanta-GA based company. Due to the passenger revenue weakness, total revenues in the March quarter tanked 51.7% and 60% to $4.150 billion from the first-quarter 2020 and 2019 levels, respectively. Revenues, however, topped the Zacks Consensus Estimate of $3.82 billion. Fuel price per gallon is anticipated in the $1.85-$1.95 range in Q2. The non-fuel unit cost (adjusted) is expected to increase between 6% and 9%.

United Airlines UAL came out with a quarterly loss of $7.50 per share versus the Zacks Consensus Estimate of a loss of $6.97. This compared to loss of $2.57 per share a year ago. These figures are adjusted for non-recurring items. United posted revenues of $3.22 billion for the quarter ended March 2021, missing the Zacks Consensus Estimate by 0.99%.

American Airlines Group Inc.’s AAL incurred a loss (excluding $2.35 from non-recurring items) of $4.32 per share, comparing favorably with the Zacks Consensus Estimate of a loss of $4.35. However, quarterly loss per share was wider than the year-ago loss of $2.65. Moreover, operating revenues of $4.01 billion slumped 52.9% year over year and also fell short of the Zacks Consensus Estimate of $4.03 billion.

Low-cost carrier Southwest Airlines Co. LUV incurred a loss of $1.72 per share (excluding $1.91 from non-recurring items) in the first quarter of 2021, narrower than the Zacks Consensus Estimate of a loss of $1.82. In the year-ago period, the company incurred a loss of 15 cents per share. Results were affected by significant decline in passenger revenues as a consequence of persistent weakness in air-travel demand amid coronavirus concerns. Meanwhile, operating revenues of $2.05 billion surpassed the Zacks Consensus Estimate of $2.03 billion. While bookings are improving, the company expects fuel costs per gallon to rise in Q2 and remain between $1.85 and $1.95 in the second quarter of 2021. In the year-ago period, the same was $1.33.

JetBlue Airways JBLU came out with a quarterly loss of $1.48 per share versus the Zacks Consensus Estimate of a loss of $1.68. This compares to loss of $0.42 per share a year ago. JetBlue, which belongs to the Zacks Transportation posted revenues of $733 million for the quarter ended March 2021, surpassing the Zacks Consensus Estimate by 2.31%.

Alaska Air Group ALK, the parent company of Alaska Airlines, incurred a loss (excluding $2.46 from non-recurring items) of $3.51 per share, narrower than the Zacks Consensus Estimate of a loss of $3.71. In the year-ago quarter, the company incurred a loss of 82 cents. Results were hurt by significant decline in passenger revenues as coronavirus keeps air-travel demand suppressed. Revenues at Alaska Air came in at $797 million, surpassing the Zacks Consensus Estimate of $787.1 million. The top line, however, declined 51.3% year over year. Passenger revenues — contributing 81.3% to the top line — were down 68% on a year-over-year basis to $658 million.

ETF in Focus

The $3.77-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 (see all industrials ETFs).

Bottom Line

While the earnings picture is still gloomy, some companies beat on top-line 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.

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Southwest Airlines Co. (LUV) : Free Stock Analysis Report
 
JetBlue Airways Corporation (JBLU) : Free Stock Analysis Report
 
Delta Air Lines, Inc. (DAL) : Free Stock Analysis Report
 
United Airlines Holdings Inc (UAL) : Free Stock Analysis Report
 
American Airlines Group Inc. (AAL) : Free Stock Analysis Report
 
Alaska Air Group, Inc. (ALK) : Free Stock Analysis Report
 
US GLOBAL JETS (JETS): ETF Research Reports
 
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