Chicago, IL – June 28, 2023 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Delta Air Lines DAL, Alaska Air Group ALK, Southwest Airlines LUV and SkyWest SKYW.
Here are highlights from Tuesday’s Analyst Blog:
Are Airline Stocks Becoming More Shareholder Friendly?
The Zacks Airline industry was one of the hardest-hit corners in the investment space during the peak of the COVID-19 pandemic. However, things started to brighten from last year with the lessening of the severity of the pandemic, the subsequent easing of restrictions and the reopening of the global economy.
Solid recovery of air travel demand, both domestic and international, has been benefiting theindustry. People are again booking flights, leading to higher passenger revenues and contributing to most airlines’ top line. Driven by increased passenger revenues, the financial health of airlines has improved.
Moreover, the lifting of restrictions under the CARES Act has allowed airline companies to initiate shareholder-friendly activities. The restrictions, under the CARES Act, prohibited airline companies from paying dividends or buying back shares till Sep 30, 2022. With the restrictions no longer in place, Delta Air Lines, Alaska Air Group, Southwest Airlines and SkyWest have made use of their financial strength and resumed dividend payouts or share repurchases, in turn, highlighting their pro-shareholder stance.
Delta Air Lines and Alaska Air currently carry a Zacks Rank #2 (Buy), while Southwest Airlines and SkyWest carry a Zacks Rank of 3 (Hold) each. You can seethe complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Let’s take an in-depth look at these companies’ shareholder-friendly initiatives.
Delta Air Lines recently announced the resumption of its dividend payout. DAL’s board of directors has approved a dividend payment of 10 cents per share. The renewed dividend will be paid on Aug 7, 2023, to all its shareholders of record as of Jul 17, 2023. The move reflects DAL’s intention to utilize free cash to enhance its shareholders’ returns.
This resumption reflects Delta's progress on its three-year financial plan (which includes debt repayment of more than $10 billion in the last two years).
Southwest Airlines also decided to start paying quarterly dividends after a pandemic-induced hiatus of more than two years following the removal of the restrictions. In December 2022, LUV’s management announced that it was reinstating its quarterly dividend of 18 cents per share. With this, LUV’s board of directors declared its 177th quarterly dividend payout in May 2023. The dividend will be paid out on Jul 12, 2023, to its shareholders of record at the close of business on Jun 21, 2023.
Alaska Air’s management resumed share repurchases this year. In first-quarter 2023, ALK purchased 413,554 shares for $18 million. The company expects share repurchases of at least $100 million in 2023.
SkyWest, in first-quarter 2023, repurchased 5.1 million shares for $100 million (which reflected 10% of SKYW’s outstanding shares as of Dec 31, 2022). The shares were repurchased under SkyWest’s previously announced share repurchase program.
Management’s decision to resume dividend payments and share buybacks reflects the stock’s financial strength. Such moves also indicate the company’s commitment to boosting shareholder value apart from its strong free cash flow-generating ability and underlining confidence in its business. These initiatives not only instill investors’ confidence in the stock but positively impacts its earnings per share.
Year-to-date Price Performance
All the abovementioned stocks have gained with respect to price in the year-to-date period.
Wrapping up
With passenger volumes likely to remain healthy, airlines are expected to remain in good shape financially. Consequently, shareholder-friendly activities are anticipated to gain further momentum.
That airlines will continue to fly high is highlighted by the fact that the International Air Transport Association (IATA) doubled its current-year forecast for net profits for airlines across the globe. Passenger revenues are the biggest driver of the rosy projection for 2023. Per IATA, passenger revenues in 2023 are now anticipated to be $546 billion compared with the previous estimate of $522 billion. The revised revenue forecast indicates a 27% increase from the 2022 actuals.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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