NEW YORK (TheStreet) -- With a growing economy, low fuel prices, and people having more disposable income, more consumer and business travel is expected in the coming months. So it's not a surprise the airline industry is poised to do well.
To be sure, airlines can be a risky investment. Lately, some of them have been dogged by safety issues. With United Airlines (UAL -Get Report) having a few scares this year, and crashes in Asia and Europe, it's important to know which airlines to invest in.
So what are the best airlines investors should be buying? Here are the top three, according to TheStreet Ratings, TheStreet's proprietary ratings tool.
TheStreet Ratings projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Based on 32 major data points, TheStreet Ratings uses a quantitative approach to rating over 4,300 stocks to predict return potential for the next year. The model is both objective, using elements such as volatility of past operating revenues, financial strength, and company cash flows, and subjective, including expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings.
Buying an S&P 500 stock that TheStreet Ratings rated a "buy" yielded a 16.56% return in 2014 beating the S&P 500 Total Return Index by 304 basis points. Buying a Russell 2000 stock that TheStreet Ratings rated a "buy" yielded a 9.5% return in 2014, beating the Russell 2000 index, including dividends reinvested, by 460 basis points last year.
Check out which three airlines made the list. And when you're done be sure to read about which high-growth aerospace and defense stocks to add to your portfolio right now. Year-to-date returns are based on April 16, 2015 closing prices.
SAVE data by YCharts
3. Spirit Airlines, Inc. (SAVE - Get Report)Rating: Buy, AMarket Cap: $5.5 billionYear-to-date return: 0.2%
Spirit Airlines, Inc. provides low-fare airline services. As of February 17, 2015, it operated approximately 325 daily flights to 57 destinations in the United States, Caribbean, and Latin America.
"We rate SPIRIT AIRLINES INC (SAVE) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its solid stock price performance, impressive record of earnings per share growth, compelling growth in net income, revenue growth and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
JBLU data by YCharts
2. JetBlue Airways Corporation (JBLU - Get Report)
"We rate JETBLUE AIRWAYS CORP (JBLU) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its solid stock price performance, impressive record of earnings per share growth, compelling growth in net income, revenue growth and attractive valuation levels. We feel these strengths outweigh the fact that the company shows weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
ALK data by YCharts
1. Alaska Airgroup, Inc. (ALK - Get Report)
Alaska Air Group, Inc., through its subsidiaries, provides passengers and cargo air transportation services primarily in the United States. The company operates through Alaska Mainline and Alaska Regional segments.
"We rate ALASKA AIR GROUP INC (ALK) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its solid stock price performance, impressive record of earnings per share growth, compelling growth in net income, revenue growth and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company shows weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
To be sure, airlines can be a risky investment. Lately, some of them have been dogged by safety issues. With United Airlines (UAL -Get Report) having a few scares this year, and crashes in Asia and Europe, it's important to know which airlines to invest in.
So what are the best airlines investors should be buying? Here are the top three, according to TheStreet Ratings, TheStreet's proprietary ratings tool.
TheStreet Ratings projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Based on 32 major data points, TheStreet Ratings uses a quantitative approach to rating over 4,300 stocks to predict return potential for the next year. The model is both objective, using elements such as volatility of past operating revenues, financial strength, and company cash flows, and subjective, including expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings.
Buying an S&P 500 stock that TheStreet Ratings rated a "buy" yielded a 16.56% return in 2014 beating the S&P 500 Total Return Index by 304 basis points. Buying a Russell 2000 stock that TheStreet Ratings rated a "buy" yielded a 9.5% return in 2014, beating the Russell 2000 index, including dividends reinvested, by 460 basis points last year.
Check out which three airlines made the list. And when you're done be sure to read about which high-growth aerospace and defense stocks to add to your portfolio right now. Year-to-date returns are based on April 16, 2015 closing prices.
SAVE data by YCharts3. Spirit Airlines, Inc. (SAVE - Get Report)Rating: Buy, AMarket Cap: $5.5 billionYear-to-date return: 0.2%
Spirit Airlines, Inc. provides low-fare airline services. As of February 17, 2015, it operated approximately 325 daily flights to 57 destinations in the United States, Caribbean, and Latin America.
"We rate SPIRIT AIRLINES INC (SAVE) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its solid stock price performance, impressive record of earnings per share growth, compelling growth in net income, revenue growth and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Powered by its strong earnings growth of 28.81% and other important driving factors, this stock has surged by 25.97% over the past year, outperforming the rise in the S&P 500 Index during the same period. Turning to the future, naturally, any stock can fall in a major bear market. However, in almost any other environment, the stock should continue to move higher despite the fact that it has already enjoyed nice gains in the past year.
- SPIRIT AIRLINES INC has improved earnings per share by 28.8% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, SPIRIT AIRLINES INC increased its bottom line by earning $3.06 versus $2.43 in the prior year. This year, the market expects an improvement in earnings ($5.31 versus $3.06).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Airlines industry. The net income increased by 29.4% when compared to the same quarter one year prior, rising from $43.19 million to $55.91 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 22.4%. Since the same quarter one year prior, revenues rose by 13.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
- SAVE's debt-to-equity ratio is very low at 0.16 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, SAVE has a quick ratio of 1.79, which demonstrates the ability of the company to cover short-term liquidity needs.
- You can view the full analysis from the report here: SAVE Ratings Report
JBLU data by YCharts2. JetBlue Airways Corporation (JBLU - Get Report)
"We rate JETBLUE AIRWAYS CORP (JBLU) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its solid stock price performance, impressive record of earnings per share growth, compelling growth in net income, revenue growth and attractive valuation levels. We feel these strengths outweigh the fact that the company shows weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Powered by its strong earnings growth of 85.71% and other important driving factors, this stock has surged by 112.79% over the past year, outperforming the rise in the S&P 500 Index during the same period. Turning to the future, naturally, any stock can fall in a major bear market. However, in almost any other environment, the stock should continue to move higher despite the fact that it has already enjoyed nice gains in the past year.
- JETBLUE AIRWAYS CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, JETBLUE AIRWAYS CORP increased its bottom line by earning $1.19 versus $0.51 in the prior year. This year, the market expects an improvement in earnings ($1.65 versus $1.19).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Airlines industry. The net income increased by 87.2% when compared to the same quarter one year prior, rising from $47.00 million to $88.00 million.
- JBLU's revenue growth trails the industry average of 22.4%. Since the same quarter one year prior, revenues slightly increased by 5.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
- You can view the full analysis from the report here: JBLU Ratings Report
ALK data by YCharts1. Alaska Airgroup, Inc. (ALK - Get Report)
Alaska Air Group, Inc., through its subsidiaries, provides passengers and cargo air transportation services primarily in the United States. The company operates through Alaska Mainline and Alaska Regional segments.
"We rate ALASKA AIR GROUP INC (ALK) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its solid stock price performance, impressive record of earnings per share growth, compelling growth in net income, revenue growth and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company shows weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Powered by its strong earnings growth of 100.00% and other important driving factors, this stock has surged by 34.99% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, ALK should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- ALASKA AIR GROUP INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, ALASKA AIR GROUP INC increased its bottom line by earning $4.43 versus $3.59 in the prior year. This year, the market expects an improvement in earnings ($6.01 versus $4.43).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Airlines industry. The net income increased by 89.7% when compared to the same quarter one year prior, rising from $78.00 million to $148.00 million.
- ALK's revenue growth trails the industry average of 22.4%. Since the same quarter one year prior, revenues slightly increased by 7.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The current debt-to-equity ratio, 0.38, is low and is below the industry average, implying that there has been successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.88 is somewhat weak and could be cause for future problems.
- You can view the full analysis from the report here: ALK Ratings Report
By Jon Kostakopoulos
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