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Analyzing December Profit Potential for the Top 4 Airline Stocks on Wall Street

The global airline industry thrives amid the adoption of growth-driving disruptive technologies and the evolution of passenger-centric trends. Hence, fundamentally strong airline stocks International Consolidated Airlines (ICAGY), Deutsche Lufthansa (DLAKY), Cathay Pacific Airways (CPCAY), and Air Canada (ACDVF) might be solid investments for December. Read more…

The global airline industry is capitalizing on disruptive technologies, embracing trends such as biometrics, AI, robotics, and IoT to enhance passenger experience. Moreover, the pent-up demand for travel is fueling the industry.

Therefore, investors could consider investing in quality airline stocks International Consolidated Airlines Group, S.A. (ICAGY), Deutsche Lufthansa AG (DLAKY), Cathay Pacific Airways Limited (CPCAY), and Air Canada (ACDVF) this coming month.

The air transport industry is a crucial driver of global socio-economic growth, fostering economic development, employment, tourism, local businesses, and international trade. Despite facing challenges, historical trends demonstrate that the aviation sector has consistently rebounded.

In the fiscal third quarter, the global airline industry experienced a robust recovery in passenger traffic, with a 28.4% increase in industry-wide Revenue Passenger-Kilometers (RPKs) compared to the same period in 2022. The outlook for 2024 is optimistic, anticipating a full traffic recovery worldwide.

Moreover, technological advancements and innovations continually reshape the industry, from aircraft design and fuel efficiency to in-flight entertainment and reservation systems.

The global airline market is expected to expand at a CAGR of 9.3% to reach $1.10 trillion by 2030.

Furthermore, the global Airline A-La-Carte services market is on an upward trajectory, driven by key players adopting strategic measures. Airline A-la-carte services encompass support services to enhance passenger comfort and travel experiences.

The global airline A-la-carte services market is anticipated to have a value of $147.90 billion in 2023. It is expected to expand at a CAGR of 15.9% to reach $646.86 billion by 2033.

Considering these conducive trends, let’s examine the fundamentals of the four Airlines stock picks, starting with number 4.

Stock #4: International Consolidated Airlines Group, S.A. (ICAGY)

Headquartered in Harmondsworth, the United Kingdom, ICAGY is a multinational airline group providing passenger and cargo services globally through brands like British Airways and Iberia. It also engages in aircraft leasing, maintenance, and airport services, operating a fleet of 558 aircraft.

On October 24, ICAGY’s cargo division, IAG Cargo announced an expanded 2023-2024 winter schedule with increased services from London, Madrid, and Dublin to key global destinations, including additional flights to Cape Town, Accra, Doha, and Miami. London Gatwick restarts services to Cape Town and Costa Rica, Dublin resumes flights to Miami, and Barcelona sees extra services to Buenos Aires.

The move aims to enhance capacity and support international trade during the holiday season.

On September 21, ICAGY added Cincinnati as an approved Constant Climate station in the United States, bringing the total to 21. The station facilitates the transport of time-sensitive pharmaceuticals between Cincinnati and London Heathrow, supporting global pharmaceutical logistics with a 45% increase in transported volume during H1 2023.

For the nine months ended September 30, 2023, ICAGY's total revenue and operating profit grew 33.3% and significantly year-over-year to €22.23 billion ($24.42 billion) and €3.01 billion ($3.30 billion), respectively. The company's adjusted profit and EPS increased significantly from the prior year's quarter to €2.15 million ($2.37 billion) and €40.7, respectively.

As of September 30, ICAGY had €5.53 billion ($6.07 billion) in EBITDA, compared to €3.35 billion ($3.68 billion) as of December 31, 2022.

Street expects ICAGY's revenue and EPS to grow 14.3% and 21.5% year-over-year to $7.70 billion and $0.05 for the fourth quarter ending December 2023, respectively. The company surpassed the EPS estimates in each of the trailing four quarters, which is impressive.

ICAGY’s shares have gained 21.6% over the past year and 32.2% year-to-date to close the last trading session at $3.86.

ICAGY’s POWR Ratings reflect its positive prospects. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

ICAGY has a B grade for Value and Sentiment. Within the Airlines industry, it is ranked #7 out of 29 stocks.

In addition to the POWR Ratings stated above, one can access ICAGY’s additional Growth, Momentum, Stability, and Quality ratings here.

Stock #3: Deutsche Lufthansa AG (DLAKY)

Based in Cologne, Germany, DLAKY is a global aviation company based in Germany, operating in passenger services, airfreight logistics, maintenance, repair, overhaul (MRO) services, and catering. The company provides comprehensive aviation solutions internationally.

On November 9, DLAKY and TATA announced a partnership for India's first bulk Sustainable Aviation Fuel (SAF) deal. Tata plans annual SAF investments, aligning with its Net Zero by 2035 goal. DLAKY produces SAF from biogenic residues, aiming to reduce CO2 emissions by up to 80%.

The collaboration underscores their commitment to sustainable air travel and integrating environmental principles into operations.

For the third quarter ended September 29, 2023, DLAKY generated total revenue and net profit of €10.28 billion ($11.29 billion) and €1.19 billion ($1.31 billion), up 7.7% and 47.3% from the previous year's quarter, respectively.

The company's adjusted EBIT grew 30.6% year-over-year to €1.47 billion ($1.61 billion). Moreover, its adjusted free cash flow increased 44.4% from the prior-year quarter to €592 million ($650.28 million).

DLAKY’s revenue and EPS are expected to grow 12.3% and 128.3% year-over-year to $39.14 billion and $1.60 for the fiscal year ending December 2023, respectively.

Shares of DLAKY increased 12.9% over the past year and 24.1% over the past month to close the last trading session at $8.82.

DLAKY’s POWR Ratings reflect this sound outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.

DLAKY has a B grade for Growth and Value. Within the same industry, it is ranked #4.

Click here for DLAKY’s additional Momentum, Stability, Sentiment, and Quality ratings.

Stock #2: Cathay Pacific Airways Limited (CPCAY)

Headquartered in Lantau Island, Hong Kong, CPCAY operates as a global passenger and air cargo carrier, offering a range of services, including property investment, travel rewards, aircraft leasing, and more across various regions.

On November 28, CPCAY announced it will be the first Asia-Pacific airline to feature Disney+ Original titles in its inflight entertainment, starting December 1. Passengers can access over 100 hours of exclusive content from Disney, Pixar, Marvel, Star Wars, and National Geographic.

The collaboration enhances CPCAY's award-winning inflight entertainment, recognized as the World’s Best for 2023, with a diverse selection of premium Disney+ content.

For the six months ended June 30, 2023, CPCAY's revenue increased 135% year-over-year to HKD43.59 billion ($5.59 billion). It achieved a profit for the period of HKD4.26 billion ($547 million), up 185.4% compared to the previous year's loss for the period of HKD5 billion ($641 million).

The company's EPS amounted to HKD55.20, up 167.1% from the same period of the previous year. CPCAY generated cash and cash equivalents at June 30 of HKD10.52 billion ($1.35 billion), up 66.9% year-over-year.

Analysts expect CPCAY’s revenue to grow 85% year-over-year to $12.03 billion for the fiscal year ending December 2023. The stock has gained 7.7% over the past six months and 71% year-to-date to close the last trading session at $5.05.

CPCAY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.

CPCAY has an A grade for Growth and a B for Stability and Quality. Within the same industry, it is ranked second.

To see CPCAY’s additional POWR Ratings for Value, Momentum, and Sentiment, click here.

Stock #1: Air Canada (ACDVF)

Headquartered in Saint-Laurent, Canada, ACDVF is a major airline offering domestic, U.S. transborder, and international services, including vacation travel packages and air cargo in about 50 countries. Operating under brands like Air Canada Vacations and Air Canada Rouge, the airline has a diverse fleet of 192 aircraft and manages travel loyalty programs.

On November 22, the Montreal Canadiens and ACDVF announced a multi-year jersey partnership featuring the Air Canada logo on away jerseys during road games. The addition is part of the NHL's Jersey Advertising Program.

The partnership also includes community impact, with proceeds from auctioning game-worn jerseys benefiting local children's charities through The Air Canada Foundation and the Montreal Canadiens Children’s Foundation.

For the third quarter ended September 29, 2023, ACDVF generated operating revenue of C$6.34 billion ($4.67 billion), up 19.2% year-over-year. The company reported adjusted EBITDA of C$1.83 billion ($1.35 billion), up 73.1% from the prior year quarter. It achieved adjusted net income and EPS of C$1.28 billion ($943.65 million) and C$3.41, which grew significantly year-over-year, respectively.

ACDVF’s revenue is expected to grow 30.5% year-over-year to $16.03 billion for the fiscal year ending December 2023. Its EPS is expected to be $3.38 in the same year. The company surpassed the revenue estimates in each of the trailing four quarters.

Shares of ACDVF increased 6.3% over the past month and marginally intraday to close the last trading session at $12.83.

ACDVF’s POWR Ratings reflect this robust outlook. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.

ACDVF has an A grade for Value and Quality and a B for Growth. Within the same industry, it is ranked first.

Click here for ACDVF’s additional Momentum, Stability, and Sentiment ratings.

What To Do Next?

Get your hands on this special report with 3 low priced companies with tremendous upside potential even in today’s volatile markets:

3 Stocks to DOUBLE This Year >

DLAKY shares were trading at $8.69 per share on Thursday afternoon, down $0.13 (-1.51%). Year-to-date, DLAKY has gained 5.53%, versus a 20.03% rise in the benchmark S&P 500 index during the same period.

About the Author: Kritika Sarmah

Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.


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