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James Li
James Li
Articles (1135)  | Author's Website |

3 Peter Lynch Airlines That Outperformed Markets in 2019

Stocks to consider as Berkshire’s airline holdings report earnings ahead of China coronavirus outbreak

According to the All-in-One Screener, a GuruFocus Premium feature, three Peter Lynch airline stocks that outperformed the Standard & Poor’s 500 Index in 2019 were Allegiant Travel Co. (NASDAQ:ALGT), Cebu Air Inc. (CEBUF) and Delta Air Lines Inc. (NYSE:DAL).

Berkshire airline holding American reports earnings in line with estimates

American Airlines Inc. (NASDAQ:AAL), a major airline holding of Warren Buffett (Trades, Portfolio)’s Berkshire Hathaway Inc. (NYSE:BRK.A)(NYSE:BRK.B), said on Thursday that adjusted net earnings for fourth-quarter 2019 were $1.15 per share, outperforming the consensus estimate complied by FactSet by 1 cent. For the year, American reported adjusted net earnings of $4.90 per share, up 8% from the prior year.

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American CEO Doug Parker said that while the results for 2019 showed progress toward the company’s goals, the Fort Worth, Texas-based carrier listed three initiatives for 2020: operational excellence, efficient and profitable growth and strong free cash flows. During 2019, American added 15 new gates at Dallas Fort Worth International Airport and four new gates at Charlotte Douglas International Airport, boosting unit revenues from the two hubs.

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The carrier listed a few impediments to growth, including the continued grounding of the Boeing Co. (BA) 737 Max aircraft. American reported that it cancelled approximately 10,000 flights during fourth-quarter 2019 and has removed the Max from its flight schedules through June 3.

CNBC columnist Leslie Josephs added that operational struggles led to further flight cancellations during 2019. Additionally, CNBC sources further said that the coronavirus outbreak in China resulted in the shutdown of flight operations in Wuhan and U.S. health officials beginning temperature checks from passengers flying from China at major airports, further pressuring airline stocks.

Shares of American close higher on quelled coronavirus fears from late WHO report

Despite reporting earnings that met consensus estimates, American closed over 5.4% higher on a World Health Organization afternoon report that it is “a bit too early” to flag the coronavirus outbreak as a concerning public health emergency even though the number of cases in China topped 600.

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Berkshire has not released its fourth-quarter 2019 portfolio as the deadline is 45 days after the quarter ends. Other gurus with holdings in American include PRIMECAP Management (Trades, Portfolio) and Bill Nygren (Trades, Portfolio).

Allegiant

Allegiant, a low-cost carrier operating in Las Vegas, outperformed the S&P 500 by 17.25% according to the Screener results.

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While the company mainly sells air transportation, Allegiant also offers consumers the option to add hotel rooms, ground transportation and other services to accommodate the trip. GuruFocus ranks the company’s profitability 10 out of 10 on several positive investing signs, which include a five-star business predictability rank and operating margins that outperform over 80% of global competitors.

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Cebu Air

Cebu Air, a Philippine carrier, outperformed the S&P 500 by 17.10% over the past 12 months.

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GuruFocus ranks Cebu Air’s profitability 9 out of 10 on several positive investing signs, which include a 3.5-star business predictability rank, expanding profit margins and a high Piotroski F-score of 8.

Delta

Delta, another major Berkshire airline holding, outperformed the S&P 500 by 2.02% over the past 12 months. The Atlanta-based airline said on Jan. 14 that adjusted earnings for the December 2019 quarter were $1.70 per share, 20 cents higher than the guidance range and up 31% from the prior-year quarter on strong revenue growth primarily due to high holiday travel demand.

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GuruFocus ranks Delta’s profitability 8 out of 10 on several positive investing signs, which include a strong Piotroski F-score of 8, expanding profit margins and a return on assets that outperforms 83.45% of global competitors.

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Other gurus with holdings in Delta include PRIMECAP and Jim Simons (Trades, Portfolio)’ Renaissance Technologies.

See also

Berkshire’s other major airline holdings include Southwest Airlines Co. (NYSE:LUV) and United Airlines Holdings Inc. (NASDAQ:UAL).

Disclosure: Long Allegiant Air and Southwest.

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About the author:

James Li
I am an editorial researcher at GuruFocus. I have a Master's in Finance from SMU, and I enjoy writing reports on financial trends and investor portfolios. Follow me on Twitter at @JamesLiGuru!

Visit James Li's Website


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