It was a rough market in May, with many stocks taking a plunge along with the broader market. The Dow Jones Industrial Average was down about -10% and the S and P 500 index shed about 11% in May. But not all stocks were battered – and as a group, airline stocks stand out as one of the few sectors that did well in May, with regional carriers like Alaska Air Group (ALK) and JetBlue Airways (JBLU) both posting double-digit gains on the month, and with major carriers U.S. Airways (LCC) and Delta Airlines (DAL) doing even better.
US Airways stock jumped 8% in one day late in the month, when on May 26 J.P Morgan Chase & Co. (JPM) upgraded the stock. LCC stock tallied a +20% return on the entire month of May thanks to strong industry trends. LCC stock was also upgraded on May 28 by Jessup & Lamont from “hold” to “buy.” The median price target for US Air is about $11 a share – a 30% premium over current valuations.
Talk about US Air in April was dominated by talks of a merger between the carrier and UAL Corporation(UAUA), the parent of United Airlines. But the talk in may around the airline industry was certainly about the stock’s performance and less about the US Air and United merger.
Delta Airlines is enjoying a similar 30% premium target, with the median estimate among Wall Street experts around $18 a share, compared with current pricing of around $13.50. The recent news about May traffic for Delta jumping 3% doesn’t matter, since the numbers weren’t released until a few days ago in the month of June, but the strength seen by the stock was evident in an impressive 12% gain for the month of May.
Regional carriers Alaska Air and JetBlue also rode the updraft, with ALK stock posting an 11% gain on the month and JBLU stock posting a 10% gain in the month of May.
The May traffic data from Delta and other airlines shows significant growth for the month, and as we enter the summer travel season there could be a lot to look forward to for the airline industry. With stocks flying high even on a dismal month, it bodes quite well for the sector if the skies clear up on Wall Street.
As of this writing, Jeff Reeves did not own a position in any of the stocks mentioned here.
