Moreover, the sector is a relatively cheap play. Holmes said JETS’ underlying index shows a forward price-to-earnings ratio of about 9. In contrast, the S&P 500 index is trading near a 18.6 P/E.
Looking ahead, Holmes argues that the airline industry could blow away numbers over the next four quarters.
“Most pessimism appears to be from analysts. I got a chuckle of it,” Holmes said in a phone interview. “The Street and traders show big interest in airlines.”
The industry are seeing profits fly, buoyed by a stronger U.S. economy and lower fuel prices, reports Dan Taylor for National Monitor. For instance, UAL and LUV both predicted profit records would be broken this quarter after a record first-quarter earnings last week.
Moreover, Holmes pointed out that American Airlines CEO Doug Parker is pushing for company stock as payment for his work instead of a normal salary, reflecting tremendous confidence in the company and industry. Parker’s actions mirror those of others like Oracle (NYSE: ORCL) CEO and the late Steve Jobs at Apple (NasdaqGS: AAPL), which foreshadowed great success in their respective markets.
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