Delta Air Lines Boeing 767-300(ER)

Best Airline Stocks To Buy In May

Key Insights

  • Earnings estimates for leading airline stocks keep moving higher. 
  • Analysts expect that airline companies have enough pricing power to offset the negative impact of higher fuel prices. 
  • The market also expects a robust rebound of internatinal and business travel, which is bullish for airline stocks.

Airline stocks have recently pulled back due to general market pressure, but the leading stocks in the industry continue to trade well above yearly lows as traders expect strong demand during the summer season.

Delta Air Lines

Analyst estimates for Delta Air Lines contine to move higher at a robust pace. Currently, the company is expected to report earnings of $2.83 per share in 2022 and $6.21 per share in 2023, so the stock is trading at less than 7 forward P/E.

This cheap valuation could be explained by the general market weakness. In addition, some traders are worried that rising oil prices will ultimately hurt profitability, so analysts would have to revise their profit forecasts.

However, it looks that pent-up demand for travelling is strong, so Delta Air Lines should have enough pricing strength to offset the negative impact of rising fuel costs.

Southwest Airlines

The big picture is similar for Southwest Airlines. Analysts estimates have recently moved to new highs due to strong pricing and expectations of the recovery of international and business travel.

The company is expected to report earnings of $2.43 per share this year and $3.77 per share in the next year, so the stock is trading at 12 forward P/E. This is expensive compared to Delta Air Lines, but the premium is explained by Southwest’s lower debt levels, which make it a safer investment.

It should be noted that both stocks have easily outperformed S&P 500 this year, and it looks that they will remain strong performers unless we see a major rally in the oil market.

For a look at all of today’s economic events, check out our economic calendar.