With Q1 earnings season now in full swing, Morgan Stanley focused its airline question of the week (QoW) this week on airline earnings.

This week’s QoW for investors was the following: “Are earnings revisions the primary factor on which airline stocks should trade? Yes or No.”

Responses

According to Morgan Stanley’s report, only 43 percent of investors believe that earnings revisions are the primary factor on which airline stocks should trade, whereas 57 percent of investors believe other factors should be the top influence on share price.

Analysts point out that airline stocks so far this year have been trading in line with fuel and passenger revenue per available seat mile (PRASM) trends, two metrics that are largely incorporated in earnings estimates.

Stocks Cooling Down In 2015

After a blistering run in recent years, several of the top airline stocks have lagged the S&P 500 so far in 2015.

Southwest Airlines Co LUV 0.96% has produced a modest 0.7 percent gain on the year, while shares of United Continental Holdings Inc UAL 1.91% and Delta Airlines, Inc. DAL 0.21% have both fallen more than 6.5 percent so far in 2015.

Despite the overall trend, not all airline stocks have lagged this year. In fact, JetBlue Airways Corp JBLU 0.41% stock is up more than 23 percent on the year.

Analysts’ Take

In the report, Morgan Stanley analysts explained that they agree that earnings expectations are not the primary influence on airline stocks. Analysts name unit revenue trends, capacity growth and fuel as three other short-term influences on share price.

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