We expect Hawaiian Holdings, Inc. HA, the parent company of Hawaiian Airlines, to report strong numbers when it unveils financial results for third-quarter 2015 on Oct 19, 2015. With results scheduled to be declared after the close of trading on that day, Hawaiian Holdings will be the second notable carrier to disclose third quarter earnings results after Delta Air Lines Inc. DAL.
Why a Likely Positive Surprise?
Our proven model shows that Hawaiian Holdings is poised to beat earnings this quarter as it has the right combination of two key components:
Zacks ESP: The carrier currently has an Earnings ESP of +5.88%. This is because the Zacks Consensus Estimate is $1.19 per share, while the Most Accurate Estimate is pegged higher at $1.26.
Zacks Rank: Hawaiian Holdings carries a Zacks Rank #2 (Buy). Note that stocks with a Zacks Rank #1 (Strong Buy), 2 or 3 (Hold) have a higher chance of beating earnings. Conversely, Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement.
The combination of Hawaiian Holdings’ Zacks Rank #2 and +5.88% earnings ESP makes us confident of an earnings beat at the company.
What's Driving the Better-than-Expected Earnings?
Hawaiian Holdings boasts a solid earnings history, having delivered positive earnings surprises in three of the last four quarters, with an average beat of 6.39%. The company, along with its peers, has been benefiting consistently from weak oil prices. We expect third quarter results to be positively impacted by the softness in oil prices as well.
Fuel costs account for a major chunk of an airline's operating expenses. Consequently, cheaper oil price should boost Hawaiian Holdings’ bottom line in the quarter. The carrier expects cost per available seat mile (ASM) (excluding fuel) in the third quarter to increase in the band of 2.5% to 5.5% year over year. Capacity is projected to increase in the band of 3% to 5%.
However, operating revenue per ASM in the third quarter is projected to decline in the range of 4% to 7%. Fuel price (economic) per gallon in the current quarter is expected at $2.00 to $2.10, representing a significant decline from $3.10 recorded in the third quarter of 2014.
Hawaiian Holdings’ strong balance sheet also holds promise. Moreover, the carrier’s efforts to enhance shareholders’ wealth through buybacks are encouraging.
Other Stocks to Consider
Hawaiian Holdings is not the only carrier looking up this earnings season. The following airline stocks are also likely to beat earnings in the upcoming quarter:
Alaska Air Group, Inc. ALK, the parent company of Alaska Airlines, will unveil its third-quarter earnings numbers on Oct 22, before market opens. The company carries a Zacks Rank #2 and has an earnings ESP of +0.48%.
American Airlines Group AAL has an earnings ESP of +1.48% and a Zacks Rank #2. The company will report third-quarter results on Oct 23.
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