Top airline stocks for the second quarter include Copa Holdings SA (CPA), Deutsche Lufthansa AG (DLAKY), and International Consolidated Airlines Group SA (BABWF). The share prices of all three have risen by more than 30% in the past year.
Airline stocks, as represented by the U.S. Global Jets ETF (JETS) benchmark, have fallen 4% in the past 12 months, compared with a 3% gain for the S&P 500 Index.
Here are the top three airline stocks each for the best value, the fastest growth, and the most momentum. All numbers below are as of May 16.
These are the airline stocks with the lowest 12-month trailing price-to-earnings (P/E) ratio. Because profits can be returned to shareholders in the form of dividends and buybacks, a low P/E ratio shows that you’re paying less for each dollar of profit generated.
|Best Value Airline Stocks|
|Price ($)||Market Capitalization (Market Cap) ($B)||12-Month Trailing P/E Ratio|
|Air France-KLM Group (AFLYY)||1.68||4.3||4.6|
|American Airlines Group Inc. (AAL)||14.20||9.3||5.6|
|United Airlines Holdings Inc. (UAL)||45.35||14.9||7.8|
These are the top airline stocks as ranked by a growth model that scores companies based on a 50/50 weighting of their most recent quarterly year-on-year YOY percentage revenue growth and most recent quarterly YOY earnings per share (EPS) growth.
Both sales and earnings are critical factors in the success of a company. Therefore, ranking companies by only one growth metric makes a ranking susceptible to the accounting anomalies of that quarter (such as changes in tax law or restructuring costs) that may make one figure or the other unrepresentative of the business in general. Companies with quarterly EPS or revenue growth of more than 1,000% were excluded as outliers.
These are the three airline stocks that had the best returns or smallest declines in total return over the past 12 months among the companies we looked at.
Airlines and their stock prices are subject to many external forces that the companies have little control over, from oil prices to global pandemics to aircraft crashes. The airline industry is recovering from one of its worst crises to date as the coronavirus subsides, so investors are focused on which companies will do this best. Several airlines have gone bankrupt in recent years, while others barely break even by flying unprofitable routes at low prices. Now, airlines face the possibility of a global recession that would lower revenue across the sector.
Airline stocks tend to be cyclical, which means that airline share prices are largely affected by the national economies of their home countries. Profits and share prices of cyclical companies tend to follow the ups and downs of the economy; that's why they are called cyclical. When the economy booms, sales of goods—such as plane tickets—tend to thrive. On the other hand, cyclical stocks are prone to suffer in economic downturns. Airline stocks are also volatile, more so than ever during the pandemic years. Their beta is usually greater than 1, which demonstrates both their riskiness and potential for reward to an investor.
There are few airlines that can actually be considered dominant and stable after years of industry consolidation, so this makes it easier to invest in them, should you want to buy stock in individual companies rather than in an airline exchange-traded fund (ETF) or themed mutual fund.
Also, under normal conditions, airlines earn consistent revenue simply because there will always be a low season and a high season for traveling. Provided too many bad events don't occur close together, airline revenue will remain more or less stable.