Which airline stocks to buy have been a sore subject to a certain degree for retail and institutional investors alike. Currently, the industry is performing surprisingly well due to growing travel demand, which is expected to continue in the coming years, and increased earnings growth. But on the other hand, the industry as a whole can tumble seemingly overnight, which is what occurred during the start of the pandemic.
The industry is nearing and, in other places, exceeding its pre-pandemic levels regarding earnings and share price appreciation. It’s an interesting opportunity for investors seeking upside potential.
I have chosen a few strong airline stocks to buy for investors due to their impressive share price growth recently. These stocks are still trading at a great valuation due to their low forward P/E ratio compared to the industry average.
Delta Air Lines (DAL)
Delta Air Lines (NYSE:DAL) is a passenger airline company that provides transportation and cargo services globally. It also provides aircraft maintenance and engineering services.
Delta Air Lines’s share price has risen by 54% within the last six months due to increased overall travel demand and a favorable outlook for Delta regarding earnings potential.
DAL has a forward P/E ratio of 7.98, while the industry average is 18.95, making it a steal, especially for value investors, even with its surge in share price.
On April 10, DAL released its earnings for the first quarter of 2024, and it stated that total revenue rose by 8% year-over-year. A net loss was reported for the first quarter of 2023 of $363 million. However, in the first quarter of 2024, it increased to net income of $37 million. And for the second quarter of 2024, Delta Air Lines anticipates total revenue year-over-year will rise by 5% to 7%.
DAL beat analyst expectations for its most recent earnings report. With the industry experiencing an increase in travel demand, Delta could continue to rise due to growing investor sentiment.
Copa Holdings (CPA)
Copa Holdings (NYSE:CPA) is a passenger airline and cargo company operating out of Panama. It offers customers flights to destinations in North America, South America, and the Caribbean. It operates a fleet of 106 aircraft.
On Feb. 7, CPA reported earnings for the fourth quarter of the full year 2023, stating that total revenue increased by 3% and net income more than doubled to $192 million compared to the previous year. Passenger traffic also rose 11% year over year.
Copa Holdings is a relatively stable option for investors seeking exposure to the passenger airline industry. Over this past year, its share price has increased by 8%, but it is also trading at a very low valuation of a forward P/E of 6.26, while the industry average is nearly triple at 18.95.
CPA also offers investors a strong dividend yield of 4.72% on an annual basis. Its latest quarterly dividend, distributed on March 15, was $1.61 cents per share.
Copa Holdings beat expected earnings for the fourth quarter, and with its growth in passenger traffic, CPA is trending in the right direction. Investors should pay greater attention to this company; it is extremely undervalued and offers an outstanding dividend, especially among passenger airliners.
SkyWest (SKYW)
SkyWest (NASDAQ:SKYW) is a regional airliner that offers passenger and freight transport services. Currently, SkyWest operates a fleet of approximately 600 aircraft.
Over this past year, it has been leaps and bounds above other airline stocks regarding share price appreciation. Its share price has nearly tripled since May 2023, primarily due to strong earnings growth and potential upside of investors.
On April 25, SkyWest announced its earnings for the first quarter of 2024, stating a net loss of $22 million for Q1 2023. And for the first quarter of 2024, it increased to a net income of $60 million. Total revenue grew by 16% year-over-year.
Similar to the other airline stocks mentioned, SkyWest beat analyst predictions for its most recent earnings release and continues to trade at a surprisingly low valuation, considering its surge in share price. SkyWest is trading at a forward P/E of 11.39, while again, the industry average is 18.95.
Increased travel demand and impressive earnings growth make SkyWest a great airline stock to buy. It offers increasing growth potential and a low valuation, which could send its share price even higher.
As of this writing, Noah Bolton held a LONG position in SKYW. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
