JPMorgan Downgrades Three Airlines, Lifts JetBlue on Mixed Views

(Bloomberg) -- U.S. airline stocks are likely to be mixed Tuesday after JPMorgan analysts downgraded three carriers on post-earnings share declines but upgraded a fourth as improving industry margins and strong seasonal passenger traffic offer optimism into 2019.

The airlines have fallen 14 percent since the beginning of the month on mixed earnings results and amid a broad selloff in global markets. Yet “the industry remains on a path towards margin expansion for the first time since 2014,” analysts led by Jamie Baker wrote in a note, and the reset in stock prices suggests shares will rise amid robust demand, disciplined fuel costs and stable labor costs.

The view led JPMorgan to cut United Continental Holdings and Spirit Airlines to neutral from overweight and lower Southwest Airlines to underweight from neutral. JetBlue Airways, however, was raised to overweight from neutral. Specifically, Baker noted Southwest shares look stalled until investors see momentum in margin expansion, and JetBlue may see upside to its earnings forecasts and estimates. JetBlue shares rose 1.5 percent in pre-market trading in New York and Southwest fell 0.9 percent.

To contact the reporter on this story: Courtney Dentch in New York at cdentch1@bloomberg.net

To contact the editors responsible for this story: Chris Nagi at chrisnagi@bloomberg.net, Will Daley

©2018 Bloomberg L.P.