Buffett hates airlines -- How about you?
US Airways Group, Inc., ( LCC ) through its subsidiaries, provides air transportation for passengers and cargo. It operates approximately 3,000 flights daily to 190 communities in the United States, Canada, Mexico, Europe, the Middle East, the Caribbean, and Central and South America. As of December 31, 2009, the company operated 349 mainline jets supported by its regional airline subsidiaries and affiliates operating as US Airways Express, which had approximately 236 regional jets and 60 turboprops. US Airways Group operates a hub-and-spoke network with hubs in Charlotte, Philadelphia, and Phoenix; and a focus city at Ronald Reagan Washington National Airport. The company was founded in 1981 and is headquartered in Tempe, Arizona. ( Press release)
The airline is expanding into both Europe, South America and Asia. That makes this stock a risky business but with taking risks sometimes comes rewards. Let's look at the pros and cons and see if you think this stock belongs in your portfolio.
The stock had recent upward price momentum with 14 new highs in the last 20 trading sessions including 5 new highs in the last 5 sessions. Price appreciation has been 48.38% in the last month earning the stock a Barchart 96% technical buy score with 12 of 13 indicators signaling a buy. The stock trades around 10.64 with a 50 day moving average of 7.68.
Overall investor sentiment as measured on Motley Fool is mixed but still slightly positive with CAPS members voting that the stock will beat the market by a vote of 436 to 340 with the more experienced All Stars equally split 125 to 84. Fool does note that of the financial columnists they follow the articles have been positive 9 to 1.
Wall Street is high on the stock with 4 buy and 3 hold reports published based on an estimated increase in sales of 13.20% this year and 4.60% next year. EPS growth is expected to be 153.60% this year, plus 35.30% next year. Long range the 5 year compounded EPS growth rate is only expected to be 3.00%.
I note that even Value Line is reporting that this is a timely stock and looks for increases sales , earnings and price.
The pros are:
- Recent upward price momentum with consistent new highs better than 50% of the recent trading sessions
- Positive though split investor sentiment
- Wall Street recommendations based on estimates of increases in sales and earnings
The cons are:
- Oil prices can always tank profits
- Airlines are recently having some labor strikes
- Iceland's volcanoes can shut down European travel in an instant
This is a highly risky short term price momentum play and not a long range appreciation stock. Note the 5 year compounded EPS growth of only 3%. Place moving stop losses to protect your gains if you decide to take a flyer on an airline stock.
Jim Van Meerten is an investor who writes on financial matters on Financial Tides,Barchart Portfolio Blogs, Seeking Alpha, Marketocracy and MSN Top Stocks. Please leave a comment below or email JimVanMeerten@gmail.com
Disclosure: No positions in the stocks mentioned at the time of publication