Dj American Airlines Group Inc. Stock Outperforms Competitors Despite Losses On The Day

GE Aerospace GE has entered into a maintenance, repair and overhaul (MRO) offload agreement with United Aerospace Maintenance Company (“UAMCO”) in Cyprus to focus on quick turnaround services for CFM LEAP engines.

Based in Larnaca, Cyprus, UAMCO recently received EASA approval for quick-turn maintenance on LEAP-1A engines for Airbus A320neo aircraft and LEAP-1B engines for Boeing 737 MAX aircraft. The company is collaborating with GE Aerospace On-Wing Support to deliver on-wing and near-wing retrofits for the LEAP-1A engine's new reverse bleed system. It has two teams available globally for these installations.

The CFM LEAP engine offers 15% better fuel efficiency and reduced carbon emissions compared with the CFM56, with operators saving up to 20% on fuel costs. With more than 3,500 LEAP-powered aircraft in service, the engine has saved more than 35 million tons of CO2 and set a record for the fastest ramp-up in engine flight hours, exceeding 60 million in just eight years.

This collaboration will help GE Aerospace meet its MRO obligations to CFM within an open ecosystem that includes internal capacity from GE and Safran, and external providers competing for LEAP engine work.

GE’s Zacks Rank

GE currently carries a Zacks Rank #2 (Buy). In the year-to-date period, the company’s shares have gained 59.8% compared with the industry’s 54.1% growth.

GE Aerospace has been witnessing strength in its businesses, driven by robust demand for commercial engines, propulsion and additive technologies. Rising U.S. & international defense budgets, geopolitical tensions, positive airline and airframer dynamics and robust demand for commercial air travel augur well for the company.

Other Stocks to Consider

Other top-ranked companies are discussed below.

Southwest Airlines Co. LUV currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Southwest Airlines delivered a trailing four-quarter average earnings surprise of 111.6%. In the past 60 days, the Zacks Consensus Estimate for LUV's 2024 earnings has increased 222.6%.

SkyWest, Inc. SKYW presently sports a Zacks Rank of 1. The company delivered a trailing four-quarter average earnings surprise of 79.12%.

In the past 60 days, the Zacks Consensus Estimate for SKYW’s 2024 earnings has increased 4.1%.

American Airlines Group Inc. AAL currently carries a Zacks Rank of 2. AAL delivered a trailing four-quarter average earnings surprise of 124.37%.

In the past 60 days, the consensus estimate for American Airlines’ fiscal 2025 earnings has increased 35.5%.

Zacks Investment Research

Have you been paying attention to shares of United Airlines (UAL)? Shares have been on the move with the stock up 40.8% over the past month. The stock hit a new 52-week high of $89.6 in the previous session. United Airlines has gained 116.8% since the start of the year compared to the 5.3% move for the Zacks Transportation sector and the 36% return for the Zacks Transportation - Airline industry.

What's Driving the Outperformance?

The stock has an impressive record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on October 15, 2024, United reported EPS of $3.33 versus consensus estimate of $3.1.

For the current fiscal year, United is expected to post earnings of $10.23 per share on $56.73 billion in revenues. This represents a 1.79% change in EPS on a 5.6% change in revenues. For the next fiscal year, the company is expected to earn $11.61 per share on $61.44 billion in revenues. This represents a year-over-year change of 13.51% and 8.31%, respectively.

Valuation Metrics

United may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.

On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. Investors should consider the style scores a valuable tool that can help you to pick the most appropriate Zacks Rank stocks based on their individual investment style.

United has a Value Score of A. The stock's Growth and Momentum Scores are C and C, respectively, giving the company a VGM Score of A.

In terms of its value breakdown, the stock currently trades at 8.7X current fiscal year EPS estimates, which is not in-line with the peer industry average of 10.5X. On a trailing cash flow basis, the stock currently trades at 4.8X versus its peer group's average of 6.1X. Additionally, the stock has a PEG ratio of 1.06. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

Zacks Rank

We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, United currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.

Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if United fits the bill. Thus, it seems as though United shares could have potential in the weeks and months to come.

How Does UAL Stack Up to the Competition?

Shares of UAL have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? One industry peer that looks good is American Airlines Group Inc. (AAL). AAL has a Zacks Rank of # 2 (Buy) and a Value Score of A, a Growth Score of B, and a Momentum Score of D.

Earnings were strong last quarter. American Airlines Group Inc. beat our consensus estimate by 130.77%, and for the current fiscal year, AAL is expected to post earnings of $1.91 per share on revenue of $53.67 billion.

Shares of American Airlines Group Inc. have gained 19.3% over the past month, and currently trade at a forward P/E of 9.77X and a P/CF of 2.25X.

The Transportation - Airline industry is in the top 6% of all the industries we have in our universe, so it looks like there are some nice tailwinds for UAL and AAL, even beyond their own solid fundamental situation.

Zacks Investment Research