Wall Street Lunch: Airline Stocks Take Off

Summary:

• Airline stocks soar as Southwest and American Airlines raise guidance, with AAL up 15% and Southwest, United, and Delta up around 5%.
• Kroger’s earnings impacted by lower fuel prices and specialty pharmacy sale, but sees slight profit improvement.
• Disney increases its dividend, paying $1.00/share in fiscal 2024, up from $0.75/share, benefiting investors on Walt Disney’s birthday.
• Bitcoin prices surge on anticipation of favorable crypto regulations, with predictions of a strategic bitcoin reserve potentially pushing prices above $400,000.

Listen below or on the go on Apple Podcasts and Spotify

American and Southwest get bullish for holiday demand. (0:15) Disney raises dividend. (1:53) Intel appoints two new board members. (4:26)

This is an abridged transcript of the podcast.

Our top story so far. Airline stocks are heading higher on bullish comments from Southwest (NYSE:LUV) about travel trends and increased guidance from American Airlines (NASDAQ:AAL).

Southwest raised its unit revenue per available seat mile for the current quarter. Unit revenue is now expected to increase by 5.5% to 7% from initial estimates of up 3.5% to up 5.5%.

The carrier said it is “encouraged by recent revenue trends and forward bookings, including fourth quarter holiday travel, and currently expects strong revenue trends and tactical initiative performance to carry into 2025.”

American is now looking for adjusted Q4 EPS of $0.55 to $0.75, more than double its previous range of $0.25 to $0.50.

It sees total revenue per available seat mile to be about flat to up 1% vs the same period in 2023 and cost per available seat mile to be between 5% and 6% vs prior guide of 4% to 6%.

AAL is up 15%, while Southwest, United (UAL), and Delta (DAL) are up around 5%.

Among other active stocks, Kroger’s (KR) Q3 revenue was impacted by lower fuel prices and the sale of its specialty pharmacy business. The effect was offset by a slight improvement in profits and a marginal increase in expectations for FY24 sales.

The company now expects identical sales ex-fuel to increase by 1.20% to 1.50% from prior guidance of up 0.75% to 1.75%. Kroger also narrowed its EPS guidance to a range of $4.35 to $4.45 per share from $4.30 to $4.50 per share, versus the consensus estimate of $4.44 per share.

It’s Walt Disney’s birthday, but investors get the present. Disney (DIS) boosts its dividend to $1.00 per share, up from $0.75 per share paid to shareholders during fiscal 2024.

The dividend will be paid in two installments of $0.50/share semi-annually. Last year the company paid out $0.30/share in the first half, which rose to $0.45 in the second half.

And Synopsys (SNPS) is slumping following weaker-than-expected guidance for fiscal 2025.

But Needham pointed out that guidance missed most estimates due to the extra week during fiscal 2024 versus 2025 and the ramp in hardware revenue expected during the second half of 2025.

In today’s trading, on this day in 1782, Martin Van Buren, who served as president from 1837-41, was born. Following the panic of 1837, Van Buren was a proponent of an Independent Treasury where the U.S. would hold reserves in vaults instead of banks with an aim to take the politics of the money supply. While blocked during his one term, eventual laws for an Independent Treasury led to the Federal Reserve Act in 1913.

One of the aims of crypto has been not just to take the politics, but all of the government, out of the money supply. But it’s anticipation of a friendly crypto government that has prices surging and bitcoin (BTC-USD) above $100,000.

Here’s what SA analysts say:

Kennan Mell says if the new administration creates a strategic bitcoin reserve, other countries will follow suit, and the price could top $400,000.

Wright’s Research says bitcoin and crypto “in general are most likely to be assigned to the ‘greater fool theory.’ “

Joseph Calhoun says the market is “in the midst of one of those periodic eruptions of irrationality that brings forth all manner of con men, flimflam artists, and fraudsters,” but Multiplo calls today a “great entry point” with a favorable regulatory environment coming.

Looking to the economy, weekly initial jobless claims rose to 224,000 vs. 215,000 consensus and 215,000 prior. The four-week moving average was 218,250, an increase of 750,000 from the prior week’s revised average of 217,500.

Pantheon Macro economist Samuel Tombs says they “expect initial claims to rise gradually this winter, sustaining the upward trend in the unemployment rate and putting pressure on the FOMC to continue to reduce the funds rate.”

In other news of note, Intel (INTC) said it has appointed former ASML executive Eric Meurice, and the interim CEO of Microchip, Steve Sanghi, to its board.

The appointments are effective immediately, and both will serve as independent directors. The news comes a couple of days after the company said its CEO, Pat Gelsinger, is retiring and will be replaced by co-CEOs David Zinsner and Michelle Johnston Holthaus.

Media reports suggested Gelsinger was forced out at Intel after the board lost confidence.

And in the Wall Street Research Corner, should you be checking Reddit (RDDT) before the opening bell?

Goldman Sachs’ technical specialist Scott Rubner says one of the key dynamics in supporting a year-end stock rally is retail investors, and he’s keeping a close eye on trending names.

Rubner said in late November that a rally would push the S&P 500 (SP500) to 6,200 by the end of 2024.

Retail traders are “home for the holidays” and “unite at the town watering hole,” as they participate in a year-end “FOMO” rally, Rubner said.

“I am back to checking Reddit every morning to see the names of the day.”

Names prevalent on the WallStreetBets subreddit include Nvidia (NVDA), Intuitive Machines (LUNR), and Archer Aviation (ACHR). WallStreetBets was thrust into prominence during the height of the meme-stock craze in 2021.

The Goldman Sachs Equity Panic Index, a rolling percentile of four equity volatility metrics, has wiped out new lows “and we are seeing retail activity pick up,” Rubner added. “This can also been seen in record call options (largest on record) and high-flying names.”

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