Republic Airways Holdings, Inc. (NASDAQ:RJET)

CAPS Rating: 2 out of 5

The Company operates as an air carrier providing scheduled passenger and air freight service as US Airways Express, AmericanConnection, Delta Connection and United Express.

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Member Avatar TSIF (99.96) Submitted: 4/4/2014 7:06:43 PM : Outperform Start Price: $8.92 RJET Score: -5.37

Airlines haven't been my play the last five years or so. It appears however, that the airlines have become more friends than competitors and rally around their brethren by matching or instituting new fees for the travelling public. Cutting routes ensured fuller planes. It does appear, thinking about SKYW that I upthumbed a few weeks ago, that the smaller airlines are not reaping the gratitude of the investing public for their astute earnings increases as much as the larger airlines.

The weather this quarter, however, may cause a hiccup in the share prices of all airlines.

As noted with SKYW, pilots at the smaller airlines aren't happy. Labor contract disputes are becoming the norm. The smaller planes don't have the scale of economy as the larger planes and 50 seaters are getting phased out.

Republic Airways Holdings has had it's price cycle 15-20% UP and then 15-20% down SIX times the last year. Each time, the lower low is lower, so it could drop to $8.60 or lower before going back up.....some technicalists like head and shoulders or double bottoms, but I'm not sure what you do with a six heads and 12 shoulders and six bottoms....

Fundamentally, hard to tell if metrics work well on an airline with tons of capital and depreciation, but a P/S of 0.34 and a P/B of 0.83 would seem to provide some margin.

Shares out standing is moderate, QoQ is up and operating margins are 15%.

Debt rising, but so is property plant/equipment.

I don't like them as well as SKYW, but lets see if that is another bottom or if we need to go a little lower....I don't think this is a long term hold if the pattern continues....probably will opt out barring good news or a change in fundamentals on an up.

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Member Avatar Mega (99.95) Submitted: 3/2/2014 2:39:16 PM : Outperform Start Price: $9.05 RJET Score: -8.29

Now that they've gotten rid of Frontier, the business is more predictable again. They are quite good at contract air service but it was hidden by Frontier's lousy performance the past few years.

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Member Avatar TulipSpeculator1 (80.32) Submitted: 7/5/2013 3:09:32 PM : Outperform Start Price: $11.37 RJET Score: -40.29

Big earnings gains are being predicted over the next few years and a recovering economy should benefit airlines by repairing their image among investors.

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Member Avatar Staka (98.10) Submitted: 4/22/2013 9:42:26 AM : Outperform Start Price: $10.89 RJET Score: -42.33

Positive:
- Create huge cash flows which allow to reduce debt
- Spin-off of Frontier could improve balance sheet and profitability, sitll not fully reflected in stock price

Negative:
- Might suffer from the economic slowdown currently visible

Category: R13BRm

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Member Avatar trfenwyd (< 20) Submitted: 4/7/2013 6:45:25 PM : Underperform Start Price: $10.33 RJET Score: +38.28

Continuing labor relation issues plus operational inefficiencies and a high debt load will hurt earnings. High pilot attrition in the coming two years plus the inability to recruit from a declining pool of qualified new first officers will increase flight cancellations.

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Member Avatar TMFGemHunter (41.95) Submitted: 2/28/2013 5:41:45 PM : Outperform Start Price: $9.34 RJET Score: -33.05

Both elements of Republic's business (regional flying and Frontier-branded mainline flying) are finally showing real improvement. The sale or spinoff of Frontier should provide further upside momentum this year.

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Member Avatar bearsniper (22.02) Submitted: 4/29/2011 2:18:30 PM : Outperform Start Price: $5.49 RJET Score: +16.16

Oversold with the high prices of oil. Should rebound by October as these stocks are cyclical.

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Member Avatar yzryan (27.22) Submitted: 3/29/2011 9:52:38 PM : Underperform Start Price: $6.23 RJET Score: +5.74

10K risk factors is doom and gloom. I don't remember seeing a positive at all. There own filing says everyone else is in control of this company execpt management. Oh yea, huge debt!

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Member Avatar ExtremesTracker (82.34) Submitted: 3/9/2011 2:20:26 PM : Outperform Start Price: $6.22 RJET Score: -5.66

picksource: allstarportfolio

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Member Avatar golfinflyr (< 20) Submitted: 1/16/2011 7:55:42 PM : Underperform Start Price: $6.14 RJET Score: +28.57

This one could very well go to ZERO. Compare their debt to equity to LUV. It's one of the ugliest balance sheets I have seen in a long time. Throw in $100 plus oil, and increased competition from the LUV AAI behemoth....no chance.

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Member Avatar honcharella (78.59) Submitted: 12/21/2010 10:19:40 AM : Outperform Start Price: $16.44 RJET Score: -90.31

While this stock is unloved lately, it has the potential to be the next jetblue. The ticker info leaves out the fact that they also own Frontier airlines. The fastest growing airline in the country. To be growing right now is huge news. Why? They need new gates, equipment, and people. Right now all of these things comes at a discount. Some airports are desperate for new business (St. Louis, Cincinatti, Pittsburgh.) I wouldn't be suprised to see a major expansion into one of these markets in the next year all obtained at rock bottom landing rates and favorable lease agreements. When the sector picks up (higher prices, more discretionary spending, higher corporate travel budgets) the dollars will roll in. One big negative is the HUGE amaount of debt the company has. Also, the fact that their unions are becoming increasingly hostile because of drawn out contract negotiations and cheap tactics employed by management. In the short term I would not put it at a buy, but give it 6 mos. Hopefully by then some wrinkles will be ironed out. But, don't kid yourself, there is no way in hell this place will be the next southwest with it's current management, but maybe jetblue...

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Member Avatar megalong (< 20) Submitted: 7/20/2010 7:03:04 PM : Outperform Start Price: $5.03 RJET Score: -3.58

Republic Airways used to be just another regional airline like Pinnacle, Skywest, etc. I think this is a good business model which is underpriced by the market. But now, since they acquired Frontier and Midwest, they are a totally different company.

I read through their most recent quarterly and annual reports to try to get a sense of how quickly they can integrate Frontier/Midwest, cut costs and return to profitability.

The thing that jumps out to me about the past two quarters is that despite negative normalized income of -$74M and -$25M, free cash flow has been +$172M and +$19M. There have been large noncash charges, a large majority of which are one-time. On top of that, there are cash expenses associated with integrating Midwest and Frontier into Republic (for example, rebranding planes and uniforms, converting computer systems, etc). Those costs are going to continue for the next few quarters but should wind up by the end of the year.

I identified at least $26M in one-time items for the current quarter that should come off next quarter. But the number may be significantly higher - there are $30M in marketing costs and $36M in other Frontier/Midwest costs that seem like they may be reduced during the integration process. On top of that, they expect additional cost saving of $10M this year from upgrading some of the planes. Part of being an efficient airline is leasing, returning, buying, and selling planes fairly continuously.

So factoring in large reductions in noncash expenses and smaller reductions in cash expenses, I think they are likely to make at least $5M over the next 3 quarter, with FCF well above that. This is in contrast to the approximately $5-10M loss that analysts expect over the next 3 quarters.

The debt is a little scary, but I have confidence in Republic's proven management team to cut costs and pay it down. My bigger concern is their exposure to fuel costs. The risk is obviously much greater than when they were a contract airline and most fuel costs were passed on.

Recs

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Member Avatar smudge1260 (< 20) Submitted: 4/13/2010 3:31:59 PM : Outperform Start Price: $6.41 RJET Score: -24.23

RJET has the lowest costs and highest margins in the industry for its outsourced business, which also has high customer satisfaction survey results from passengers of the legacy carriers using RJET, so this outsourced business will only grow going forward.
RJET bought Midwest Airlines and Frontier for almost nothing in 2009, and has invested aobut $100 million in restructuring and unifying them for its branded business. Changing the name to Frontier is a solid move, and they will continue to cut costs and achieve synergies.
RJET is underpriced at less than half of book value. S&P has a positive outlook for the airline subindustry right now. RJET's price is out of line with much peers that have much higher costs and lower margins. RJET will be a survivor, and I expect its price to appreciate to at least 80% of book value by the end of 2010.

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Member Avatar iddqkfyou (< 20) Submitted: 3/17/2010 1:24:18 PM : Outperform Start Price: $5.32 RJET Score: -9.34

They are trading for less than 1/2 of book and their business in improving; they broke even last year and if you back out unusual expenses (honestly I did not look up what that was) it made .50usd last quarter alone. They have a lot of debt... No inside ownership. But I still think a price of 8-10usd is more reasonable.

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Member Avatar dnblack (70.35) Submitted: 3/2/2010 2:09:53 AM : Outperform Start Price: $4.96 RJET Score: -2.98

The Good:
-Massively undervalued (as in priced for EPS to shrink by 25% per annum for 5 years before flattening out).
The Bad:
-Massively in debt (as in 4.5 debt/equity). This will be particularly bad if we go into any sort of deflationary period as people seem to be speculating.
The Ugly:
-It is an airline (and losing its niche status by acquisitions). As Buffet puts it: "...the money that had been made since the dawn of aviation by all of this country's airline companies [is] zero."

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Member Avatar AllStarPortfolio (36.91) Submitted: 9/9/2009 1:53:59 PM : Outperform Start Price: $9.23 RJET Score: -88.29

On September 09, 2009 at 1:24 PM, checklist34 (99.86) wrote:

RJET, to date, has been a company that operates flights for other airlines. Basically, if you are United or Delta or whomever, you would hire RJET to fly some flights for you. RJET owns and/or leases planes, trains and employes crews, and operates flights for larger airlines for a fee. Fuel costs, to date, have not been relevant to RJET as they pass this cost through to their customers. As this business alone, RJET is priced fairly cheaply, highlights of current valuation (as its initial core RJET business alone include):

mkt cap about $300M, sales about $1.4B, profit in a recent years about $70-80B. P/E 6, forward p/e 4, price/book 0.6. These are good valuations that imply the stock is probably priced too cheaply based on existing businesses and existing prices.

However, in recent months RJET has made a profound change to its business. It aquired, for essentially nothing, Midwest Airlines and, also for next-to-nothing, Frontier Airlines. Frontier will emerge from bankruptcy in the near future, and has been profitable for 10 consecutive months while in chapter 11, most recently Frontier profited $17M in July, also $11M in June I believe. Frontiers revenue is similar to RJETs, I honestly don't know what the revenue at Midwest is.

The combined company - RJETs original business + Frontier + Midwest would be a $3+ billion dollar company, giving it a price/sales of less than 0.1. It would also, at current profit rates at Republic and Frontier, have earnings potential of $70M (republics past annual profits) + $100M (a not-aggressive annualized profit estimate for Frontier based on recent months performance) + $30M of synergy savings (estimated at 20-50M by rjet management) + profit - loss at Midwest (currently not profitable). That comes to $200M of annualized profits putting RJET at a forward p/e of 1.5. If it traded at a multiple of 7.5 you have a 5 bagger from todays share price. In an extremely good case where Frontiers profitability was as good as it has been in recent months, republics original business returned to peak profitability, cost savings were at the high end of the scale, and Midwest turned profitable, earnings could be higher. At a multiple of 9 (as high a multiple as RJET had in the past) valuation would still be well under LUVs in basically all areas and the market cap would be a large multiple of todays.

There are of course risks. Some concerns that have been voiced by various parties include deterioration of Republics initial business (contract flying) due to it now being a competitor with its customers. RJET now has exposure to fuel prices. RJET faces the challenge of a fundamental change of what its business is and those may not be trivial. LUV may become angry over losing the frontier auction and aggressively attack RJET's Frontier and Midwest businesses in Denver and Milwaukee.

Still, it is difficult to imagine a long term case where the PPS has significant downside from here except in an everything-went-wrong situation.

I am willing to bet against an everything-went-wrong situation because I think RJET has competent management, and, frnakly, I think that beating LUV which at the time had a market cap 25 times larger than RJETs in the auction for Frontier speaks to that managerial competence.

I have put my money where my mouth is with the a large stake in real life at $6.50, I added slightly to that stake in the $8's recently. This rec on CAPs is from a higher PPS which is too bad, but I still think that in the fullness of time this pick will be a big winner.

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Member Avatar sig00 (< 20) Submitted: 8/28/2009 11:49:07 AM : Outperform Start Price: $9.39 RJET Score: -91.10

Great management
Limited fuel exposure

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Member Avatar Investorloi (60.74) Submitted: 7/26/2009 1:30:45 AM : Outperform Start Price: $5.22 RJET Score: -30.09

Great regional airline company with low ratios vs. historical ratio. Look for this company to double once ratio expands.

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Member Avatar bigboybumble (< 20) Submitted: 6/24/2009 9:15:31 AM : Outperform Start Price: $6.80 RJET Score: -81.62

This stock is amazing

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Member Avatar broker7005 (23.60) Submitted: 6/19/2009 9:16:16 PM : Outperform Start Price: $4.22 RJET Score: -6.38

bull

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