- A day after Cowen analysts downgraded several airline industry names, Morgan Stanley weighs in on the sector, maintaining its attractive view for 2017 as pricing is on a more stable path and P/Es remain low at ~12x.
- Stanley thinks U.S. carriers are set to continue their supply discipline in 2017 even as the Trump administration potentially drives tax reform and consumer stimulus, while warning that airline stocks have surged in recent months and that margin compression has the potential to deliver a 350 basis point drop during the year.
- The firm upgrades Southwest (NYSE:LUV) to Overweight on its "defensive qualities," revenue opportunity and fuel hedges, while downgrading United (NASDAQ:UAL) to Equal Weight on execution risks and a relatively rich valuation; yesterday, Cowen cut UAL while maintaining LUV at Outperform.
- Other relevant tickers include DAL, AAL, ALK, JBLU, SAVE, SKYW, JETS.