American Airlines Group Inc (AAL)

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Over The Next 12 Months Airline Stocks Will Be 'A Lot Higher,' And Here's Why

11:00 am ET May 17, 2015 (Benzinga) Print
Host of airlines stocks have been soaring high in the past few months.

Although a lot of it has to do with the decline in crude price, the surge in travel due to a buoyant economy can also not be ruled out.

Gary Bradshaw from Hodges Capital Management was on CNBC recently to discuss his outlook for the airline sector overall and to share his favorite picks in the sector - American Airlines Group Inc (NASDAQ: AAL), and Southwest Airlines Co (NYSE: LUV).

Reversing The Downward Trend

“We actually think that the airlines are poised to move higher, Bradshaw said. “And they have cut their capacity, they have consolidated, they have pricing power, operating margins are improving and we believe that this oil will stay lower for longer and so we think that’s going to provide a big tailwind for the airlines.”

He continued, “We love American at the Hodges fund, we like Southwest Airlines and we think their earnings and cash-flow will drive higher and move these stocks up that will reverse the downward trend in the transportation averages.”

A Lot Higher

Bradshaw was asked whether it will be better if oil prices stabilize here and move higher. He replied, “Well, we think it will stabilize in this $55 to $65 range and we think that will be a benefit to the airlines. They make great money when oil was $100 a barrel; we think they will make a lot more this year.”

“They are all giving cash back to shareholders, returning cash in the way of dividends, they have got great share buybacks and we just think this is a buying opportunity and that looking out over the next 12 months, the airlines will be a lot higher,” Bradshaw said.

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