Lehman Brothers Investment Report - A Long Time Coming

[USA320Pilot]

Lehman Brothers Investment Report – A Long Time Coming

We believe airline fundamentals remain strong amid an exceptional revenue environment fueled by a strong economy and restrained capacity. We continue to believe, however, that current share prices reflect much of that good news, though we still see selected pockets of potential opportunity. Top picks AAI, UAUA, and LCC.

 A long time coming, but industry's first really good quarter approaches. Expect profits from every single carrier we follow. In most cases, substantial profits.

 Unfortunately, recent events causing a spike in fuel will likely weigh on the group since most fuel guidance based on energy forwards. Good news is revenue remains exceptional, though highly contingent on continued economic strength.

 Raising numbers across the board for 2Q on revenue, but reducing 2H06 and 2007 numbers on fuel that is mostly offset by better revenue. LCC and CAL buck the trend. Raise estimates on CAL slightly and LCC significantly on revenue.

 No way around industry's exposure to geopolitical climate and economic conditions, but present industry fundamentals as solid as they've been at any point since 2000.

 Valuation keeps us sidelined on most names, but we still find AAI, UAUA, and LCC compelling at current levels.

 

[robbedagain]

how would they even make a profit let alone break even with the current Middle East Crisis going on and with oil topping 76.70 one, then 77.03 the next and who know what it will be next week? It will be mighty hard don ya think?

 

[pilot]

Why would it be hard? If the morons tied ticket prices to the cost of fuel it would be simple. These cretins that run the companies have you conditioned to expect losses if fuel increases. Most well run companies, where fuel makes up a substantial portion of their expenses, have "fuel surcharges".

Geez what a novel idea. Pass along the expense of doing business to the consumer instead of the employees.

pilot

 

[PITbull]

Why would any broker house think any airline stock a potentially good investment, long or short-term, in todays unstable environnment. With energy fuel costs out of control, the inflation that it creates forcing the majority of the public's ability to afford even the bare necessities nearly impossible, makes one think that Lehman Brothers may have pressure from some investors to pump up the stock...everyone knows that Lakefield was the ex 25 year Executive , ex-CEO.

There has got to be much better investments, even those that are mediocre than an airline investment. Wouldn't it make more sense to buy, ah,..an oil company stock?????, pays a dividend,...then an airline stock????

I suspect some covert manuevering going on, and buyer beware!

So USA320, how much stock are you stuck,er,uh, I mean sitting on?????

 

[hp_fa]

Because, at the end of the day their work product is nothing more than an opinion. And opinions are like ________, everyone has one. Their real goal is to stimulate trading. They make money on each trade.

 

[whlinder]

Why would any broker house think any airline stock a potentially good investment, long or short-term, in todays unstable environnment. With energy fuel costs out of control, the inflation that it creates forcing the majority of the public's ability to afford even the bare necessities nearly impossible, makes one think that Lehman Brothers may have pressure from some investors to pump up the stock...everyone knows that Lakefield was the ex 25 year Executive , ex-CEO.

There has got to be much better investments, even those that are mediocre than an airline investment. Wouldn't it make more sense to buy, ah,..an oil company stock?????, pays a dividend,...then an airline stock????

Well, if you think oil is going to head down sometime soon, an airline stock would be a decent investment and oil company stocks probably wouldn't be so great. I believe Mr. 320 felt that oil was overpriced last year. If he still feels that way, I can see him loading up on LCC stock.

The revenue increases are very promising and long overdue. I wonder how much it is tied to WN finally raising fares. Lets hope the industry continues to find ways to increase revenue and avoids stupidly low fares like they have in the past (and like UA put out briefly last week).

 

[john john]

Lakefield was the ex 25 year Executive , ex-CEO.

Good point

 

[Dog Wonder]

The best way to judge the accuracy of this report is how many free shares the top corporate parasites cash in.

 

[BoeingBoy]

While not "free".....

7/6/2006 - Jeffrey McClelland exercised options for 28,875 shares @ $26.06 per share and 34,475 shares @ $25.60 - that's a total cost of $1.635,042.50. The same day, he sold all 64,350 shares for $55.00 per share or $3,539,250.

7/12/2006 - Derrek Kerr exercised options for 5,913 shares @ $20.34, 18,562 shares @ $25.60, and another 8,800 shares @ $25.60 - total cost was $820,737.62. These were immediately sold in three lots - 20,000 shares @ $53.00, 5,000 shares @ $52.60, and 8,275 shares @ $52.70 or $1,759,092.50.

7/17/2006 - Jeffrey McClelland exercised an option for 20,635 shares @ $6.42. The same day these shares were sold for $47.25 per share.

Jim

 

[EricLv2Fish]

And many other Westies sold shares at a signficant profit. Since 2002 when AWA shares dipped to $1.10 imagine....if we would have some guts and faith in AWA we could all be millionares cheaply! Look buying stock is no different than gambling. The higher the risk, the higher the reward. Take it or leave it. I keep my money in an agressive mutal fund. Semi risky with higher rate of return. It's all about what your willing to risk.

 

[Dog Wonder]

And many other Westies sold shares at a signficant profit. Since 2002 when AWA shares dipped to $1.10 imagine....if we would have some guts and faith in AWA we could all be millionares cheaply! Look buying stock is no different than gambling. The higher the risk, the higher the reward. Take it or leave it. I keep my money in an agressive mutal fund. Semi risky with higher rate of return. It's all about what your willing to risk.

And what exactly did the people Boeing Boy cited risk?

Insiders cashing in is not a good sign.

 

[LD3]

Airline profits finally set to take off
BY TERRY MAXON/The Dallas Morning News

For the first time in years, U.S. airlines as a group should show a profit, not a loss, when they report quarterly earnings in coming days.

A combination of higher fares and fuller airplanes is benefiting airlines, which haven’t reported a profitable quarter as an industry since 2000.

“June quarter results for the U.S. airline industry are expected to be strong,†Merrill Lynch analyst Michael Linenberg said in a report last week, “and we think September’s results could be even better.â€

Southwest Airlines Co. and AMR Corp., parent of American Airlines Inc., both are expected to report higher profits today when they kick off the earnings season for airlines.

Dallas-based Southwest is expected to report net income of 26 cents per share, or about $209 million, according to a consensus of industry analysts surveyed by Thomson Financial. In second quarter 2005, Southwest earned 18 cents per share, or $144 million.

AMR is projected to post a profit of $1.14 per share, or about $215 million. The Fort Worth-based carrier earned 30 cents, or $58 million, in the 2005 quarter, only the third time since the beginning of 2001 the company had reported a quarterly profit.

On Thursday, Continental Airlines Inc. is expected to report net income of $1.90 a share, or about $167 million. A year earlier, it earned $1.26 a share, or $100 million. Excluding a special one-time item a year ago, Continental earned 69 cents a share, or $53 million.

Airlines have been able to raise airfares this year, and JP Morgan analyst Jamie Baker estimated that average fares per seat per mile will go up 11 percent in 2006. In addition, the carriers are reporting jam-packed airplanes, with average loads exceeding 80 percent.

Linenberg estimated that the U.S. airline industry will report a net profit of $1.2 billion collectively for the second quarter, double his previous estimate for the airline group.

UAL Corp., parent of United Airlines Inc., is an example of the improved fortunes for major airlines. UAL is expected to post a profit of about 46 cents a share, or about $45 million.

That’s not much for what is traditionally one of the best, busiest quarters of the year. But it’s a significant improvement for the nation’s second-largest carrier, which lost more than $3 billion in the second quarters from 2001 to 2005.

[b]The star of this round of earnings may be US Airways Group Inc., which combined last year with America West Holdings Corp. Analysts expect the carrier to report earnings of $3.31 a share, or about $285 million.[/b]
Two major carriers operating in bankruptcy, Delta Air Lines Inc. and Northwest Airlines Corp., are expected to continue to lose money. In reports filed with a bankruptcy court, Delta said it had a net loss of $43 million in April and May, compared with a net loss of $2.07 billion in the first three months of 2006. Northwest reported April-May losses of $383 million. That compares with a net loss of $1.75 billion in the first quarter of 2006 and $225 million in the second quarter of 2005.

 

[flyingcat]

And what exactly did the people Boeing Boy cited risk?

Insiders cashing in is not a good sign.

Well for their positions they could go to AA or other carriers and get paid a lot more. Besides most of the stuff that happened was not because they all had a meeting and decided to jump ship.

Any portfolio manager would freak out if their client is invested heavily on a single highly volatile stock. Most of the selling was automatic based on serveral conditions.

Don't forget that they still have more options so if they truly were jumping ship they would tax all of it. Besides when you do pay out a huge chunk of that money is going toward taxes, and it is a lot higher than sales tax.

 

[PhxMama]

Well for their positions they could go to AA or other carriers and get paid a lot more. Besides most of the stuff that happened was not because they all had a meeting and decided to jump ship.

Any portfolio manager would freak out if their client is invested heavily on a single highly volatile stock. Most of the selling was automatic based on serveral conditions.

Don't forget that they still have more options so if they truly were jumping ship they would tax all of it. Besides when you do pay out a huge chunk of that money is going toward taxes, and it is a lot higher than sales tax.

Then I guess Dougs portfolio manager is an idiot. He hasnt sold. I wonder why.

 

[EricLv2Fish]

Then I guess Dougs portfolio manager is an idiot. He hasnt sold. I wonder why.

DP has stated many times that he won't sell his stock so long as he is CEO of US Airways. History backs up his statement.

"And what exactly did the people Boeing Boy cited risk?

Insiders cashing in is not a good sign."

How can one argue against top management having a stake (shares) of the company they are trying to run? I would be more concerned if those running the company did not have a vested interest in running a sound company.

The fact remains that many AWA employees have made a big bang for their buck too since 2002. Perhaps that is why many AWA employees look favorably at the job our management has done since that time?