Taking Flight: 3 Airline Stocks Set to Soar Above the Competition in 2024

As the airline sector emerges from the Covid-led turbulence, investors want to cash in on the resilient airline stocks to buy. While grounded fleets once painted a grim picture, the industry’s recent spike in travel demand is a major tailwind for top-line expansion ahead.

Nevertheless, despite this resurgence, the sector isn’t without its share of headwinds, including costly labor agreements and rising fuel expenses that have clipped its wings, with crude oil prices soaring past the $90 mark. Moreover, geopolitical tensions and China’s economic deceleration have further weighed down the sector. However, the forecast isn’t all gloomy, with market analysts spotting clear skies ahead into 2024, predicting a robust recovery for the global aviation market.

United Airlines (UAL)

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Despite the market headwinds, United Airlines (NASDAQ:UAL) performed relatively well compared to its peers in the third quarter. It posted results that comfortably exceeded analyst estimates, delivering an EPS of $3.65, significantly higher than the predicted $3.35. Moreover, this performance effectively reflects a robust revenue upswing to $14.48 billion, edging past the $14.44 billion forecast. Notably, this represents a 12% bump from the previous year’s figure. Though it beat analyst estimates across both lines, UAL shares dipped 6% following a tempered forward-looking statement.

The headwinds are attributed to soaring jet fuel costs and the suspension of lucrative Tel Aviv flights amidst the Israel-Hamas conflict. These factors prompted United to project a fourth-quarter EPS ranging from $1.50 to $1.80, falling short of analysts’ $2.06 consensus.

Looking ahead, United Airlines is banking on a vibrant holiday season to propel its next wave of expansion. Its proactive stance amidst challenges and bullish forecast for end-of-year travel positions it as an airline stock to buy.

Delta Air Lines (DAL)

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Delta Air Lines (NYSE:DAL) has been trading in the green in the past week on the back of its powerful third-quarter achievements, with profits soaring roughly 60% thanks to a stellar summer season. The company’s EPS of $2.03 eclipsed forecasts by a hair, underscoring the company’s effective navigation through a season of robust demand. Although revenue touched down just shy of the $14.56 billion mark at $14.55 billion, it marked a commendable 13% increase year-over-year.

Delta has been particularly impressive internationally, with Trans-Atlantic routes having witnessed a powerful 34% surge in sales from the prior year. The clamor for luxury has been ringing loud and clear, with the company observing a healthy increase in premium seating demand, with sales surging by an impressive 17% to $5.11 billion.

Despite these strong currents, Delta is charting a cautious path ahead, tempering its full-year earnings forecast in light of rising fuel costs. Nonetheless, investors remain buoyant over DAL stock, especially with the airliner reinstating dividends and pointing to solid travel demand in the fourth quarter.

Southwest Airlines (LUV)

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Southwest Airlines (NYSE:LUV) presents a silver lining for value-seeking investors navigating market turbulence. The stock is down by double-digit margins year-to-date, reflecting a market reluctant to board with the Dallas-based carrier. The latest earnings report revealed a slight miss with a third-quarter Non-GAAP EPS of 38 cents, a cent below expectations, and sales narrowly falling short by $40 million.

Furthermore, the third quarter of 2023 saw revenues reaching a record $6.5 billion, marking a 4.9% increase year-over-year. However, its estimates across both lines are by considerable margins. In a sector where liquidity is as critical, Southwest maintains a formidable $12.7 billion in reserves, outstripping its $8 billion debt. The carrier’s financial acumen shines through with a cash reserve of $3.32 billion over the past 12 months, towering over the sector’s median by more than 1100%.  

On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.

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