Airline stocks and sector-specific exchange traded fund are flying high after JetBlue Airways (NasdaqGS: JBLU) and Southwest Airlines (NYSE: LUV) reveal strong fourth quarter results.
The U.S. Global Jets ETF (NYSEArca: JETS), the only dedicated airline industry-related ETF on the market, was up 2.0% Thursday, touching a new 52-week high.
Airline stocks were enjoying a tailwind Thursday. Supporting the bounce, JetBlue Airways revealed a 2.9% year-over-year growth in revenue for the fourth quarter.
JetBlue’s management was pleased with the performance after strong earnings over the past two years have allowed the company to dramatically reduce debt and put the airline in a much better financial position going forward, according to Motley Fool.
“We ended 2016 with a debt to adjusted capitalization ratio of 35%, in the middle of our target range of 30% to 40%. Our efforts to de-risk the balance sheet in recent years allows JetBlue to evolve toward a more balanced approach to capital allocation, starting with our $120 million in share repurchases in fourth quarter 2016,” interim CFO Jim Leddy said.
J.P. Morgan also recently upgraded JetBlue shares to overweight.
“JBLU has risen to the front of the ranks in terms of inbound investor interest. We sense an opportunity,” Analyst Jamie Baker said.
“JetBlue continues to pursue a more returns-oriented strategy with separate fare classes and first-checked-bag fees, which in turn drives healthier margins,” Baker wrote in a note. “We also applaud the JetBlue management team’s willingness to not only participate in industry pricing increases led by other airlines but also to initiate fare increases of its own.”
Meanwhile, Southwest Airlines revealed record earnings in 2016.
“Our total operating revenues reached a record $20.4 billion, with sustained demand for our legendary low fares and superior customer service,” Southwest chairman and CEO Gary Kelly said in a release accompanying the company’s earnings report. “Our profit margins were very strong, and our return on investment capital was a near-record 30 percent.”
The U.S. Global Jets ETF includes a 11.9% tilt toward Southwest and a 3.9% position in JetBlue.
For more information on airliners, visit our Airline category.