01-02-08: Manufacturing Sector Disappoints + $100 Oil = Continued Airline Stock Carnage

Just thought I would memorialize a few facts from the first trading day of 2008. Crude oil trades at over $100 per barrel for the first time. [Crude oil actually traded at less than $11 per barrel in December of 1998.] Gold trades at a 27 year high. 1 Euro can buy 1 US Dollar and 47 cents. A report issued by the Institute of Supply Management suggested a contraction in the manufacturing sector which is an important barometer of US economic activity.

Airline stocks continued their downward drift in the face of more and more signs pointing to a weakening US economy. Most experts I heard interviewed today suggested that they see little in the way of oil price relief unless there is a significant global economic slowdown.

Now some stock facts on select US airlines…….

Of the 9 US publicly traded US stocks I consider significant, 8 set new 52-week lows: American, Continental, Delta, Northwest, US Airways, Southwest, jetBlue and AirTran.

United closed 37 cents above its 52-week low.

For these stocks setting new 52-week lows; American, Continental, Delta, Northwest, US Airways and Southwest all traded at least 3 times their average daily volume.

jetBlue’s market capitalization closed the day at less than $1 billion. The carrier’s stock still trades at 61 times its forward earnings suggesting there still may be more stock price damage ahead.

Of the 9 airline equities analyzed, the three largest in terms of market capitalization are: Southwest, $8.7 billion; United and Delta, $3.7 billion each.

Southwest trades at 20 times its forward earnings and United trades at 14.5 times. American, Continental and US Airways all trade at, or below, 7.5 times forward earnings.

The market capitalization of the 6 US network carriers combined ($17.3 billion) is the equivalent of 17.5 cents per dollar of revenue ($98.9 billion).

The LCC carriers: Southwest, jetBlue and AirTran would cost considerably more as their combined market capitalization ($10.3 billion) is the equivalent of 70.9 cents per dollar of revenue ($14.5 billion). Southwest comprises nearly 85 percent of the three carrier's market capitalization. Southwest’s market capitalization is the equivalent of 90 cents per dollar of its revenue.