Hi Tom,
Sorry to take so long to respond, but I wanted to be sure of where I speak. I don't follow Air Transportation with even infrequent research, so it takes a while to get up to speed on the industry.
Where to start... Well, let's start with United Parcel Service (UPS), my first surprise. I would have presumed that UPS would be an Air Transportation industry company, but no, it's in trucking... Okay, so where is FedEx Corp (FDX)??? Right, in Air Transportation... Go figure... (Hmmm... Note to self: must have something to do with Tom Hanks' role in "Castaway"... Oh, well...) The two biggest competitors (excluding the United States Postal Service) in package delivery, and they're not even classified in the same industry. My mistake, I guess... <g>
Continuing on with UPS, the PE tends to be a tad on the high side for my tastes, so I'm not anxious to jump on board yet. Profit margins appear to be thin, leaving little room for error. Anecdotal information has it that package deliveries for the Christmas season are currently under the levels attained in prior years, so it's likely that there will be no help for the numbers this quarter. In short, nothing particularly enticing about UPS right now. And UPS appears to be a seasonal and cyclical stock, the "high" season being right now (Christmas deliveries) and cyclical for shadowing the manufacturing and retail business cycle(s).
FDX has the same problems as UPS, so again, nothing particularly attractive about the stock as an investment vehicle right at the moment. Seasonal and cyclical as well...
Airborne (ABF) is not currently profitable, so I won't even look at it. (Hey! I have a bias against companies with no profits... I buy profits, not stories. If they want to sell a story, they can call Reader's Digest... <g>)
What does look good? Well, Value Line lists 3 possibilities, and none of the three looks like a "lock". All have considerable risk factors associated with them.
The first is a company called Pemco Aviation (PAGI). They are the best of the three. They actually have profits, and a very low PE. They're also repurchasing shares (or so they claim). Pemco basically does aircraft maintenance and modifications, largely for the Feds. They also sell aircraft parts. Value Line does not have a standard report for PAGI, but does include them in the expanded edition database of stocks. Biggest risks are a lack of analyst coverage, a dearth of institutional ownership (3 mutual funds that I could find), small cap classification, and heavy dependence upon government budgets. That said, the company announced today that they inked a $600M contract with Boeing (multi-year, I'd guess) for maintenance and repairs of a particular aircraft model. I'd classify this stock as a promising speculative hold, and I wouldn't bet the farm on it either, maybe a small fraction of my speculative venture money.
The next company is Air T (AIRT). Again, Value Line includes this company in its expanded stocks database, but has no company report on them. They have the same risks as PAGI (no analysts, no easily identifiable institutional investors, small cap risks, etc.). The company has a hodgepodge of business lines, including aircraft maintenance and repairs, airfreight services (mostly in conjunction with FedEx contracts), parts seller/re-seller, aircraft de-icing, etc. The company is on a revenues and earnings roll right now, recording triple digit increases on a Y-O-Y basis. I'd treat them the same as PAGI, investing no more than a very small fraction of my speculative monies. Caveat: With the relatively warm winter weather in the nation's eastern and northern airports, the de-icing revenues may suffer. Just anecdotal information to consider. I haven't seen any announcements or anything yet.
The last company to consider is AirNet Systems (ANS). This company is also in airfreight, but specializes in time critical deliveries, especially routing cancelled checks around the country for the major banking networks and banks. Again, a lack of analyst coverage (only 1 that I can find), but much better on the institutional investors (Value Line lists 15 mutual funds, and I found several others with smaller holdings). With a PE varying between 10 and 15 (double to triple the first two stocks), the stock is much less of a value play. However, the stock had been in major decline for the past few years, and now the chart looks like a bottom has formed, and it's generally up from here. No guarantees mind you, just that it looks good. Value Line does have a standard report on them in its expanded edition. Same investment advice as before. Think small number of shares and think speculative. Value Line lists some double digit earnings growth rates for the stock, in the 20% and greater range, but beware of those numbers. There is only one analyst that covers ANS, and s/he could be wrong. And just for the record, that analyst carries a HOLD rating on ANS, which (to me) seems to be inconsistent with the recent performance of the company. I'd likely place a (speculative) BUY rating at this point if it were my decision. But what do I know? By the way, this stock appears to be the least speculative of the three, but I still consider it speculative.
So to sum it up, other than the three stocks mentioned above, I'd avoid the industry entirely. Disclosure: I have no current investment in any of the above mentioned stocks, and (other than the 3 speculative equities mentioned), I have no plans to invest in any of them. I might throw some money at PAGI, AIRT and ANS, but in the current economic environment, I am hesitant to do so. We'll see, I guess... <vbg>
Kerry |
