Airline Stocks To Buy And Watch As Path To Profitability Emerges: Separate Winners From Losers

Travel demand is recovering from lows reached last April, after nations around the world restricted flights. U.S. airlines have received government assistance amounting to billions to help keep employees paid. New coronavirus cases in the U.S. are falling.

At a conference on Tuesday, Delta Air Lines (DAL) said it expects travel trends for the month of June to be better than May, with a full return of domestic leisure travel demand by June. And it said demand for premium seats, which bring in more profit, has outpaced that in the main cabin. United Airlines (UAL), in a filing on Tuesday, said that yields — or average fare paid per mile — in some cases were trending near or above 2019 levels.

American Airlines (AAL), at that conference, said small and medium-sized companies were driving the rebound in business-travel. But the degree of that rebound still varied depending on location and industry, and stood at about 30% of 2019 levels.

Meanwhile, ambassadors from European Union nations have also supported a plan to allow vaccinated travelers and travelers from nations where Covid cases are under control. But those measures need backing from EU member states.

Delta, in April, said it saw a „path to return to profitability“ by the third quarter. United Airlines was similarly upbeat about profit hopes, while American and Southwest (LUV) also saw improvements in demand.

However, most airline stocks are still below pre-pandemic levels. Airline executives have predicted a bumpy recovery this year. But analysts expect most airlines to return to profitability next year. Below, we take a look at the chart action for the major U.S. airlines.

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Delta Stock Chart

Delta stock is consolidating with a 52.38 entry. But it needs to move higher before it forms a base. Shares of the carrier have regained support at their 50-day line.

Delta’s EPS Rating is 5 out of a best-possible 99. Its Composite Rating is 34.

The stock’s relative strength line has rebounded slightly, after falling in April.

American Airlines Stock Chart

American Airlines stock is also in a consolidation with a 26.19 entry.

Similar to Delta and the other airline stocks, it has a mediocre 43 Composite Rating and an 10 EPS Rating.

American is the only airline stock mentioned here that is expected to still lose money next year.

United Airlines Stock Chart

United Airlines stock is also in a consolidation with a 63.80 entry. The stock has regained support at its 50-day line.

The carrier’s ratings, as with other airline stocks, are also weak. United has a 37 Composite Rating. Its EPS Rating is 5.

Southwest Stock Chart

Southwest stock is in a flat base with a 64.85 buy point. However, shares of the air carrier, which Cowen said was the least leveraged airline heading into the pandemic, have topped pre-pandemic levels.

Still, Southwest has 37 Composite Rating and a 5 EPS Rating. The stock is below its 50-day line.

JetBlue Stock

JetBlue stock is in a consolidation with a 22.06 entry.

Shares have a Composite Rating of 36, with an EPS Rating of 5. The stock is below its 50-day line.

Are Airline Stocks Buys Right Now?

Even as airline stocks rebound from the pandemic and begin consolidation patterns, the industry’s recovery is likely to be uneven. IBD ratings for airline stocks are weak.

Bottom line: Airline stocks are not buys right now. Investors eager to play the recovery could step in once those stocks enter buy zones. But IBD advises investors to seek out stocks with better ratings that are closer to their highs.

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