Longer wait for airline results take-off
Nasdaq edges up 0.1%; S&P, Dow both ~flat
Cons Disc leads S&P 500 sector gainers; Energy down most
Dollar, gold up slightly; bitcoin down >3%; crude off >1%
U.S. 10-Year Treasury yield dips to ~4.23%
Welcome to the home for real-time coverage of markets brought to you by Reuters reporters. You can share your thoughts with us at markets.research@thomsonreuters.com
LONGER WAIT FOR AIRLINE RESULTS TAKE-OFF
Airlines aren't the weakest of the transports stock group on Tuesday, but Seaport Research Partners is out with a less than glowing report for the sector citing a laundry list of issues including weaker than hoped for demand, plane delivery issues, pricing pressures, and last Friday's global tech outage which grounded flights.
Based on reports from 3 carriers so far this quarter - Alaska Air Group ALK.N, United Airlines UAL.O and Delta Air Lines DAL.N - Seaport analyst Daniel McKenzie said he was resetting revenue estimates for the sector and pushing his expectation for margin expansion out to Q4.
McKenzie wrote in a research note, dated July 22, but emailed on July 23, that he had expected choppy stock performance for the first half of the year but anticipated that Q2 earnings would be an inflection point for the group with the help of hopes for Q3 revenue and margin expansion.
But now he writes that July revenue challenges will "likely prompt more airlines to disappoint on their 3Q24 outlook" so his expectation for better stock performance has been pushed out to Sept or Oct.
McKenzie estimated a cost to U.S. airlines of >$100 million stemming from the operational disruptions from Friday's CrowdStrike CRWD.O tech problem, though he did caution that it was early days to try to put a number on the issue.
This includes an estimate for ~$40 million in costs for Delta alone as the carrier has canceled more than 5,000 flights since Friday, leading the U.S. Transportation Department to say on Tuesday that it was opening an investigation into the airline.
McKenzie said he reset second-half revenue expectations for six airlines - American Airlines AAL.O, Allegiant Travel ALGT.O, JetBlue JBLU.O, Southwest Airlines LUV.N, Spirit Airlines SAVE.K and Copa Holdings CPA.N - and revised Seaport's price targets for Allegiant and Copa.
McKenzie cites summer oversupply due to a demand forecasting error on the part of airlines as higher interest rates have slowed the economy, which "leaves normalized demand an open question mark" and "materially lower than last year."
This brings creates challenges as the airlines have to pay for "labor's historic wage deals," he wrote.
The analyst cited delivery delays from plane maker Boeing BA.N and also said he expects premium seats to be the next "revenue battle ground."
On Tuesday the biggest decliners from the group are American Airlines and Southwest, down more than 1% followed by Alaska Air, down 0.8%. Delta shares are ~flat after falling 3.5% on Monday.
(Sinéad Carew)
*****
FOR TUESDAY'S EARLIER LIVE MARKETS POSTS:
BOFA CLIENTS LOG THEIR LARGEST NET SALES OF EQUITIES SINCE 2015 - CLICK HERE
EXISTING HOME SALES TANK, PRICES HIT RECORD HIGH, INVENTORIES CLIMB - CLICK HERE
WALL STREET INDEXES EDGE UP WITH EARNINGS MIXED - CLICK HERE
SMALL-CAP RUSSELL 2000: MORE THRUST, OR BUST? - CLICK HERE
TRUMP STANDS IN THE WAY OF "BROADENING" TO NON-US STOCKS, CITI SAYS - CLICK HERE
THE $1 BILLION DISRUPTION - CLICK HERE
EUROPEAN STOCKS MOSTLY LOWER, GERMANY OUTPERFORMS - CLICK HERE
EUROPEAN FUTURES MIXED, EARNINGS KICK INTO GEAR - CLICK HERE
TESLA, ALPHABET EARNINGS TAKE CENTRE STAGE - CLICK HERE
Related Assets
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
