美国航空业：估值更高但倍数更低

1、US AirlinesHigher estimates but lower multiples; UAL upgraded OW, ALK upgraded to N, JBLU downgraded to N.North America Equity Research10 January 2019We are raising our 2019 estimates across the board, ahead of next weeks earningskickoff. Unfortunately, were doing it for the wrong reasons: cheaper f

2、uel and softer RASM. Given our RASM equals multiple mantra, this also necessitates diminishing our target multiples a further half turn, following a similar exercise last October. For JBLU, this drives a downgrade from Overweight to Neutral. However, stronger 2020 forecasts for ALK and UAL overcome

3、diminished multiples and result in sufficient upside potential to warrant upgrades, ALK to Neutral and UAL to Overweight, despite UAL having our lowest forecasted TRASM in the industry and the potential for a Q1 PRASM guide that may uncomfortably begin with a minus sign, in our view.Were raising our

4、 2019 forecasts Were raising our 2019 earnings forecasts by roughly 20%, and emerge above consensus for all ex-LUV. We expect industry margins to expand over 200 bps from 2018, the first such instance in fouryears.But not for the right reasons Unfortunately, cheap fuel and weaker forecasted TRASM la

5、y at the of our changes. For 2019, $2.05/gallon all-in jet down $2.40, and 1.5% industry TRASM down 3.0%. Other inputs, notably capacity, are left unchanged on that later). For 2020, $2.20/gal down $2.45/gal, and industry TRASM 1.9% down from 2.4%. Most 2020 forecasts see little-to-no change, though

6、 ALK does strengthen by a respectable degree (as does its target.)Unfortunately, RASM equals multiple We remain of the view that airline stocks are likely to de-rate should the market dissatisfied with TRASM, if earnings rise. Such was the case in 2015/2016. Accordingly, weve shaved another half-tur

7、n off our YE19 target multiples, predicated on 2020 forecasts, leaving them to range a 6x (AAL) to 9.5x (SAVE, which now overtakes all based on forecasted equity upside potential). Investors may quibble with absolute targets, but we expect few will push back on the view that a cheap fuel/low TRASM e

8、nvironment necessitates some degree of downwardadjustment.We are not revisiting capacity, despite cheaper fuel Jet fuels 2015 descent was far more meaningful than whats recently occurred. Theres no current parallel to Love Field liberalization, which contributed nearly a point to 2015 domestic growt

9、h. Fuel savings and Basic Economy were deployed in hopes of compelling ULCCs rethink their priorities, which appears to have already worked, in our view. IMO 2020 remains a sobering uncertainty. And managements that resisted the ideaEquity Ratings and Price TargetsAirlines & Aircraft Leasing/Equity

10、Jamie Baker AC(1-212) 622-6713 HYPERLINK mailto:jamie.baker jamie.bakerBloomberg JPMA BAKER J.P. Morgan Securities LLCNishantMani(1-212)622-5707 HYPERLINK mailto:nishant.mani nishant.maniJ.P. Morgan Securities LLCKaran Puri(91-22) 6157-3327 HYPERLINK mailto:karan.puri karan.puriJ.P. Morgan India Pri

11、vate LimitedCompanyTickerMkt Cap ($ mn)Price ($) Rat Curing PrevCur Price TargetEndDateEnd DateAmerican AirlinesAAL US16,432.3533.42OWn/c40.00Dec-1946.00Dec-19Delta Air Lines, Inc.DAL US33,105.0148.47OWn/c59.00Dec-1971.00Dec-19United Continental Holdings, Inc.UAL US25,451.8983.76OWN95.00Dec-19n/cn/c

12、Southwest Airlines Co.LUV US29,582.9749.08UWn/c45.00Dec-1952.00Dec-19Alaska Air Group, Inc.ALK US7,717.9262.18NUW67.00Dec-1962.00Dec-19JetBlue Airways Corp.JBLU US5,688.9117.23NOW18.00Dec-1920.00Dec-19Spirit AirlinesSAVE US4,126.0159.45OWn/c75.00Dec-1982.00Dec-19Source: Company data, Bloomberg, J.P.

13、 Morgan estimates. n/c = no change. All prices as of 09 Jan 19.See page 27 for analyst certification and important disclosures, including non-US analyst disclosures.J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that t

14、he firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. HYPERLINK / Jamie Baker(1-212) 622-6713 HYPERLINK mailto:jamie.baker jamie.bakerNorth America Equity Research10

15、 January 2019that RASM equals multiple appear to have learned their lessons, in our view, though this is perhaps the weakest of our arguments against potential incremental growth. We offer no guarantees against capacity creep in response to lower fuel, but we simply dont see reasons to increase esti

16、mated growth rates at this time.JetBlue downgraded to Neutral Our 2020 earnings forecast remains unchanged. However, we endeavor to maintain a balanced spectrum of ratings. our haircuts to target multiples, JetBlue forecasted upside potential falls below 10%, and is inched out (barely) by our higher

17、 price target for Alaska. These changes alone (as opposed to anything our model) drive JetBlue from Overweight toNeutral.Alaska upgraded to Neutral Our 2020 earnings forecast for Alaska is the only one to rise materially (+22%), slightly besting consensus. Our thought process TRASM is comparatively

18、simple. If nothing in the economy changes and Alaska merely follows its typical quarter-to-quarter revenue seasonality, a 3-5% 2019 TRASM appears achievable on 2% capacity. On the hand, company has identified $330 million of incremental 2019 revenue, which alone equates to roughly 4% TRASM. likeliho

19、od of perfectly achieving both (otherwise suggesting a high single-digit TRASM seems unlikely to us. However, a combination of reasonable traction on the $330 million combined with only slight deterioration in seasonal trend implies an industry-leading 4.3% TRASM outcome is reasonable. Combined with

20、 our revised fuel estimates, this lifts our 2019 EPS forecast $5.28 to $7.11 (vs. $6.39 consensus) and 2020 EPS from $6.16 to$7.50 (vs. $7.25 consensus). However, despite our second highest target multiple in the sector (9x behind Spirits 9.5x), our price target rises only from $62 to $67a level suf

21、ficient to warrant an upgrade to Neutral, but no further, in our view.Next week may prove choppy for UAL. We are forecasting merely a 0.9% PRASM which raises the uncomfortable possibility that guidance range may begin with a negative sign. Furthermore, and this is speculative on our part, but given

22、demand choppiness and what we consider UALs preference to further distance itself DALs recent guidance gaffs, we would not be surprised if UAL widened its Q1 PRASM range from 200 to 300 bps (a la JBLU), equating to a -1% to +2% Q1 PRASM Our thinking extends to UALs anticipated 2019 earnings guide. d

23、emand and uncertainty, and its long demonstrated preference for beat-and-raise standards (again, differentiated from that Delta), we believe United may eschew a 2019 PRASM guide and instead merely identify an estimated earnings range. At this stage, $9 to $11 would prove an adequate start, in our vi

24、ew, proving both conservative and seemingly consistent with its already-established $11-$13 2020 target, in our view. Granted, the midpoint of a$9 to $11 guide would fail to capture our $11.15 forecast and the $10.90 consensus, but given UALs aforementioned beat-and-raise track record, we would not

25、uniquely view a $9 to $11 guide as a catalyst to revisit our earnings modelbut our UAL rating nonetheless rises from Neutral to Overweight coincidentally, our diminished 2019 target multiple 7.5x (second lowest AAL) and 6% rise in 2020 forecasted earnings one another with resulting change to our $95

26、 price target. Given UALs 14% equity retrenchment just five weeks ago, we believe the combination of sector lagging forecasted PRASM and target multiple represent attractive risk/reward sufficient upside potential for UAL to return to Overweight, a position it occupied for the majority of2018.2Summa

27、ryTable 1: All of our targets are adjusted, driving three ratings changes. Price Targets/Ratings RatingsAirlineNewOld JPM New PT JPM Old PT Current Price PT % JPM%AAL-O$40.00$46.00$33.42-13%20%ALKNU$67.00$62.00$62.188%8%DAL-O$59.00$71.00$48.47-17%22%JBLUNO$18.00$20.00$17.23-10%4%LUV-U$45.00$52.00$49

28、.08-13%-8%SAVE-O$75.00$82.00$59.45-9%26%UALON$95.00$95.00$83.760%13%Source: J.P. Morgan estimates. Prices as of Jan 9, 2019.Table 2: Our 2019 estimates have risen on cheap fuel and weaker TRASM2019eNewOld% changeConsensusAAL$6.64$5.2028%$5.89ALK$7.11$5.2835%$6.39DAL$7.11$6.608%$6.67JBLU$2.17$1.7127%

29、$1.86LUV$4.82$4.488%$4.86SAVE$7.05$6.804%$6.12UAL$11.15$9.8214%$10.88Source: J.P. Morgan estimates, Bloomberg. Prices as of Jan 9, 2019.Table 3: whereas fuel and TRASM changes to 2020 mostly net one another out. Mostly.2020eNewOld% changeConsensusAAL$6.60$6.60n.a$6.31ALK$7.50$6.1622%$7.29DAL$7.85$7.

30、85n.a$7.11JBLU$2.20$2.20n.a$2.33LUV$5.05$5.25-4%$5.27SAVE$7.85$7.85n.a$6.81UAL$12.60$11.856%$12.04Source: J.P. Morgan estimates, Bloomberg. Prices as of Jan 9, 2019.Estimates rise, but not for the reason we prefer.Cheaper fuel, lower TRASM, lower multiples. Thats the crux of todays modeling exercise

31、. Weve shaved $0.35/$0.25 gallon off our 2019/2020 fuel forecasts, and 1.5%/0.5% off our 2019/2020 TRASM forecasts. Our 2019 EPS estimates actually increase by roughly 20% as a result of these changes, whereas changes to 2020 estimates are more benign (save for some idiosyncratic changes to Alaska).

32、Ordinarily, one might associate higher earnings expectations with more robust price targets or ratings. Unfortunately, given our view that airline stocks de-rate when confronted with weaker TRASM trends, we fear this will not be the case.Newcomers to the space are welcome to discuss this phenomenon

33、with us, though airline investors that experienced 2015/2016 will likely not require much of a refresher, in our view.Accordingly we also reduced each of our 2019 year-end target multiples (predicated on 2020 EPS) by a further half-turn, mimicking a similar exercise we engaged in following 3Q18 earn

34、ings (at the time, also driving some ratings changes). Our target multiples now range from 6x on the low end (AAL) to 9.5x on the high end (SAVE, which now becomes our top pick for equity upside potential, followed by DAL, AAL and UAL in descending order). Our models are yours for the asking.For tho

35、se focused on next week, here are some thoughts.Delta will kick off earnings on Tuesday January 15th. We are currently modeling for a 1.6% TRASM outcome, a deterioration from 4Q18s 3% guidance given a tougher comp, the Easter shift, and various FX headwinds. Whats unclear to us is whether Delta guid

36、es to a 1-3% TRASM outcome or flat to +2%. With think the latter would be the more conservative approach, particularly in light of Deltas recently-impaired guidance track record. But we obviously cant be sure, though we acknowledge that Delta is in need of a guidance win.While some may point out tha

37、t a paltry Q1 TRASM guide could put Deltas full-year3% TRASM guide (implied by its total revenue guide) at risk, recall that said full- year guide is also predicated on $65-70 Brent. Put differently, at current fuel prices, 3% TRASM should not lie at the root of anyones model, in our view, if intend

38、ing to harmonize with management expectations. Were simply pointing out the obvious, should Delta receive as much conference call pushback on its 2019 top-line forecast as it did this time last year regarding its EPS guide (given how fuel had rallied at the time). For what its worth, were now foreca

39、sting 1.5% 2019 TRASM $2.05/gallon fuel.But United is the trickier guide for us to figure out. For starters and this is admittedly speculative on our part were left to wonder whether United might address fuel-implied demand uncertainty and its desire to avoid Delta-like guidance missteps by broadeni

40、ng the range of its Q1 PRASM guide from 200 to 300 bps, consistent with JetBlue guidance standards. Additionally, given a less-established track record with annual guidance, we believe UAL could eschew full-year demand commentary all together, instead simply relying on EPS goalposts accompanied by o

41、nly cursory line-items (such as ex-fuel CASM).Should this prove to be the case, we believe a $9 to $11 or $10 to $12 EPS guide would prove most probable for 2019, though management could skew towards the former given its year-long penchant for beat-and-raise conservatism. Additionally, a$10 to $12 g

42、uide (again, we can easily get there with our model) might draw unwanted attention to UALs already-established $11 to $13 guide for 2020, which we do not believe management is itching to revisit at this stage. Broadly speaking, while the midpoint of a potential $9 to $11 guide would fail to capture

43、our revised$11.15 as well as the $10.90 consensus, we would not uniquely view said guide as a catalyst to revisit our current expectations given the aforementioned guidance track record over the past four quarters.Why have we left capacity alone?At this stage, we are not making any changes to our un

44、derlying growth assumptions in response to lower fuel (3.6% consolidated ASM growth in 2019 vs. 4.3% in 2018). Well admit to receiving some pushback on this topic in recent weeks, given that the memory of fuel-influenced growth in 2015/2016 is still fresh in many investors minds. So theres precedenc

45、e for concern.We believe said precedence can largely be explained away. For starters, Love Field liberalization and ensuing Southwest capacity expansion was largely coincident with fuels collapse. Inclusive of DFW (given AAL competitive response), overall Dallas growth drove nearly an entire point o

46、f domestic capacity growth in 2015. Today, there is no current airport regulatory parallel.Admittedly, low fuel in 2015 was embraced by some as a competitive hammer resulting in greater capacity, in an attempt to influence ULCC behavior at the time, in our view. Basic Economy can also trace its wide

47、r industry embrace to that period for similar reasons; to mitigate the ULCC threat and potentially cause those airlines to rethink their priorities. Recall Scott Kirby, in particular, bore most of the brunt of investors ire as it related to his competitive approach to ULCCs. But the fact is said eff

48、orts appear to have worked. ULCC growth rates have diminished, growth has shifted (somewhat) away from OA hubs, and Spirit (in particular) is emphasizing ancillary revenue in an effort avoid hand-to-hand combat in base pricing. Given the moderation in ULCC behaviour, why would the industry gang up o

49、n ULCCs for a second time, should low fuel prices persist?Then theres the sobering reality of IMO2020. Plus a still-acute pilot shortage. And OEM production challenges that, at the margin, may stall planned narrowbody deliveries. Lastly, we believe managements - which initially resisted the RASM equ

50、als multiple drumbeat from investors three years ago have, in fact, learned that all-important lesson. Admittedly, “trust in management” may prove the flimsiest of our observations, but its one we continue to have confidence in.Figure 1: UAL has the fewest “buys” of the US Big 3but JetBlue and Westj

51、et have even fewer.Source: Bloomberg.Figure 2: Current valuations appear attractive (blue), and our targets are all 10 x.Source: J.P. Morgan estimates, Bloomberg.Figure 3: We expect 2019 industry margins to resemble those last seen in 2014.Source: J.P. Morgan estimatesOverweightAmerican AirlinesNew

52、American Group (AAL;AAL US)CompanyDataPrice($)33.42FYEDec2017A2018E2019E(Prev)2019E(Curr)2020EDateOfPrice09-Jan-19EPS ($)52-weekRange($)59.08-28.81Q1 (Mar)0.820.75A0.460.79-Market Cap($mn)16,432.35Q2(Jun)2.041.63A1.952.32-FiscalYearEndDecQ3(Sep)1.501.13A1.561.95-SharesO/S (mn)492Q4(Dec)0.98-PriceTar

53、get($)40.00FY5.274.615.206.646.60Price TargetEndDate31-Dec-19Bloomberg EPSFY($)4.894.62-5.826.31Source: Company data, Bloomberg, J.P. Morgan estimates.Investment Thesis, Valuation and Risks American Airlines (Overweight; Price Target: $40.00) Investment ThesisDespite the industrys revenue momentum i

54、n 2018, American shares have been anoteworthy laggard, the worst performing stock at -38% in 2018. Fundamentally, we believe Americans 2019 capacity growth plan will be 2%, a pattern of capacity restraint that we believe will help set 2018 results as a margin support level. But we acknowledge invest

55、or frustration with American while Delta delivers industry- leading margins and new revenue initiatives, and while Uniteds turnaround plan appears to be working and winning over investors confidence Americans revenue story has been third-best and its Basic Economy execution hit-or-miss. The primary

56、rationale we see for owning AAL shares is the valuation dislocation relative to peers. Despite projected margin deficiency on a relative basis to United and Delta, we dont believe American shares should trade at a nearly 2.5x discount to United on our 2019 estimates (and a 2.0 x discount to Delta).

57、Indeed, American shares recently triggered our proprietary Down 30 in 30 rule, and we believe sentiment is bottoming out. We do not necessarily believe the companys balance sheet strategy is prudent in what feels like a late-cycle environment, but we do not envision any liquidity/solvency concerns d

58、espite some investor concerns. In other words, at this valuation level, we believe investors are more than compensated for lower margins and a riskier balance sheet. Accordingly, we rate American shares Overweight.ValuationOur AAL Dec 2019 price target is $40.00, predicated on our company-specific f

59、orward P/E multiple assumption. We are applying a 6.0 x P/E multiple to our 2020 estimates to arrive at our price target. For context, we assume higher multiples at both Delta and United (7.5x for both) to reflect Americans enhanced balance sheet risk and lower projected margin profile. AAL shares h

60、ave experienced a 2.5x P/E valuation contraction since the autumn 2018 peak when measured on a consensus 2019 basis, and we believe this is a function of investor concern on Americans leverage as well as slowing industry revenue momentum on account of cheaper fuel.Risks to Rating and Price TargetTo