Earnings Baggage Doesn’t Dog Airlines — Thursday’s IP Market Recap

Airlines, which have endured their share of pain over the past year, were delivered another seeming blow Thursday when Southwest Airlines (NYSE:LUV) posted a third-quarter loss due largely to bets the company made on volatile fuel prices — a day after American Airlines parent AMR Corp. (NYSE:AMR) reported disappointing earnings of its own Wednesday.

But rather than sink on the news, Southwest and the rest of the major players in the sector posted significant gains Thursday. Some of the beneficiaries included US Airways (NYSE:LCC, +4.34%, $6.01), United Continental (NYSE:UAL, +3.19%, $20.72) and Delta Air Lines (NYSE:DAL, +2.35%, $8.70).

Because jet fuel can represent as much as 30% of airlines’ costs, airlines use fuel hedging bets on the direction of oil prices as a check on fuel costs. However, Southwest made some bad bets, resulting in a third-quarter loss of $140 million, compared to a profit of $205 million during the same quarter in 2010.

Excluding the hedging and other one-time items, however, Southwest performed solidly during the third quarter, with a smaller profit of 15 cents a share still edging Wall Street’s expectations by a penny. And CEO Gary Kelly pointed out that the company should increase revenue per mile flown in the fourth quarter. Southwest finished the trading day up 4.5% to $9.10.

Even AMR Corp., which itself reported a $162 million loss for the third quarter Wednesday leading to stock loss of more than 7%, came back roaring Thursday with a gain of more than 10% to $2.88.

Also Thursday, AT&T (NYSE:T) mostly recovered after taking a hit from its third-quarter report, which saw earnings of 61 cents a share, matching analysts’ estimates, but a slight miss on sales expectations at $31.5 billion. AT&T, much like Apple (NASDAQ:AAPL), blamed its disappointing sales, hinging primarily on the iPhone, on customers waiting until the release of the iPhone 4S. However, the fourth quarter is off to a good start, with AT&T activating 1 million new iPhone 4S phones within the first five days of its launch. AT&T finished the day down 0.3% to $28.99.

Three Up

  • Fifth Third Bancorp (NASDAQ:FITB): Up 9.1% (97 cents) to $11.63.
  • Keycorp (NYSE:KEY): Up 6.91% (44 cents) to $6.81.
  • Nokia (NYSE:NOK): Up 6.21% (38 cents) to $6.50.

Three Down

  • Polycom (NASDAQ:PCLM): Down 25.19% ($5.50) to $16.33.
  • Ingersoll-Rand (NYSE:IR): Down 7.9% ($2.35) to $27.38.
  • Dell Computer (NASDAQ:DELL): Down 5.35% (85 cents) to $15.05.

As of this writing, Kyle Woodley did not own a position in any of the aforementioned stocks. Check out recaps from previous trading days here.


Article printed from InvestorPlace Media, https://investorplace.com/2011/10/airline-stocks-up-luv-amr-lcc-ual-dal-thursday-investorplace-market-summary/.

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