The optimism of higher travel demand has seemed to fade with many notable airline stocks falling sharply over the last few months.
Domestically, the three largest airlines by revenue Delta Air Lines DAL, American Airlines AAL, and United Airlines UAL have all seen their stocks fall of late after seeing 52-week highs in July.
With that being said, let’s see if the recent dip is a buying opportunity and what lies ahead for these leading airliners as they continue their post-pandemic recovery.
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Annual Growth Comparison
Premium Service
Delta which is considered a premium airliner for its above-average customer service and free flight changes operates a network of around 300 destinations in over 50 countries.
Delta’s annual earnings are now forecasted to soar 99% in fiscal 2023 at $6.36 a share versus EPS of $3.20 in 2022. Plus, fiscal 2024 earnings are projected to leap another 16%. On the top line, sales are expected to be up 11% this year and rise another 1% in FY24 to $56.82 billion.
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International Leader
Pivoting to United, the airline has the largest international exposure with over 130 destinations worldwide and 215 locations in the U.S. United’s earnings are anticipated to rebound and skyrocket 333% in fiscal 2023 to $10.92 per share compared to EPS of $2.52 last year. Fiscal 2024 earnings are expected to rise another 3%.Total sales are expected to jump 19% this year and rise another 6% in FY24 to $56.95 billion.
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Domestic Leader
Lastly, American has the largest domestic share in the market flying to around 350 locations domestically and more than 60 countries worldwide.
American’s earnings are now projected to rebound and catapult 476% to $2.88 per share compared to EPS of $0.50 a share in 2022. Fiscal 2024 earnings are forecasted to rise another 1%. Total sales are expected to rise 8% this year and edge up another 5% in FY24 to $55.66 billion.
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Valuation Comparison
In addition to their attractive growth recovery, all three of the major airliners stand out in terms of price-to-earnings valuation and make the case for being undervalued in this regard.
United sticks out the most trading at just 3.9X forward earnings which is a 54% discount to the Zacks Transportation Airline Industry average of 8.6X and well below the S&P 500’s 20X.
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Furthermore, Delta and American also trade at attractive discounts to the industry and benchmark trading at 5.7X and 4.4X forward earnings respectively.
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Bottom Line
At the moment all three of the big airline stocks land a Zacks Rank #3 (Hold). There could be more short term risk associated with broader market volatility and the resurgence of inflationary pressures on travel.
However, Delta, United, and American Airlines stock are making a strong case for being undervalued at their current levels, and holding on to them should be rewarding as they offer various exposure to domestic and international markets.
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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
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