Airline investors know it?s a cyclical business. When times are bad, airline stocks are among the first to feel the pain and the last to break free of it.
But when times are good ? as they are now ? the sky?s the limit.
Shares in Air Canada have had an impressive run lately, soaring more than 83% since the start of the year as demand remains strong in the Canadian market and capacity remains tight allowing carriers to raise prices.
Over the same time, WestJet?s shares have gained a more modest ? but still impressive ? 26%.
Walter Spracklin, RBC Capital Markets analyst, said doesn?t believe the good times are over either.
?With another quarter completed, we believe both Air Canada and WestJet are set to report another round of better than expected operating results,? he said in a note to clients Friday.
He noted industry traffic and yield growth has been robust while fuel prices have remained relatively rangebound.
?The key here is that despite fairly high expectations on the earnings front, better than expected first quarter data is prompting us to raise our estimates which now sit solidly above consensus,? he said.
Mr. Spracklin increased his price target on both Air Canada and WestJet on new fuel price assumptions as well. He has an outperform rating on both stocks.
He raised his price target on Air Canada to $4 a share, from $3.50 previously.
He also raised his price target on WestJet to $27 a share, from $25 previously.
?While the Canadian airline industry keeps posting solid traffic and yield growth, we believe that consensus expectations for the first quarter ? are once again ? set too low and we expect positive revisions heading into earnings set for the first week in May,? Mr. Spracklin said.
Source: http://business.financialpost.com/2013/04/05/air-canada-westjet-shares-continue-to-soar/
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