Raymond James Bullish on WestJet and Air Canada

 |  Includes: ACDVF, WJAVF
by: FP Trading Desk

After reporting a strong finish to 2008 with record load factors in December, Raymond James analyst Ben Cherniavsky upgraded his earnings estimates for WestJet Airlines Ltd. (OTC:WJAVF) and Air Canada (AIDIF.PK).

He said in a note to clients:

History has shown that the best way to make money in the airline sector is to buy the survivors at low multiples and the nadir of sector sentiment, which is where we believe we are right now. We therefore urge investors to buy WestJet’s stock. While there is arguably more leverage to be gained from Air Canada’s stock, we still view it as a less attractive risk-adjusted investment.

After the strong traffic figures released Wednesday, when combined with changed to his foreign exchange assumptions and fuel costs, he upgraded his price target on WestJet to C$15 from C$14, and maintained his “outperform” rating on the stock.

For Air Canada, Mr. Cherniavsky said he now expects its fourth quarter earnings before interest, taxes, depreciation, amortization and rent to be C$142-million, up from $91-million, and for 2008 as a whole to be C$968-million, compared to his previous estimate of C$917-million.

For 2009, he expects EBITDAR to grow to C$1.1-billion, and while he has a “market perform” rating on the stock, he said his price target is still under review due to what he called the “extremely leveraged nature” of the company.