Airline stocks at crossroads ahead of earnings

Southwest, Alaska Air Group and American Airlines Group are all scheduled to report quarterly results.

  • By Akane Otani,
  • The Wall Street Journal
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Airline shares, which have mostly lagged behind the broader stock market this year, are set to face their next major test in the coming days. Southwest Airlines Co. (LUV), Alaska Air Group Inc. (ALK) and American Airlines Group Inc. (AAL) are all scheduled to report quarterly results.

The earnings reports will give investors a sense of how much soaring oil prices, as well as the government shutdown at the start of the year, impacted airlines’ bookings and fare revenue.

Investors will also try to gauge how much airlines will get hit by flight cancellations caused by the grounding of Boeing Co.’s (BA) 737 MAX jetliners. Dow heavyweight Boeing, whose shares have stabilized since a March selloff, reports earnings Wednesday.

Even if earnings help fuel a rebound in airline stocks, many of them will remain underperformers within the transportation industry. Shares of rental car and truck companies, as well as railroads, have raced past airlines this year.

But with airline stocks looking relatively cheap, analysts say there is a chance that upside surprises throughout earnings season could spur a fresh round of buying. A number of airlines carry price-to-earnings ratios that are well below the S&P 500’s (.SPX) P/E ratio.

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