ReportWire

Tag: Delta Air Lines Inc

  • Southwest Airlines to cut service and staffing in Atlanta to slash costs

    Southwest Airlines to cut service and staffing in Atlanta to slash costs

    [ad_1]

    A Southwest Airlines plane takes off from Hartsfield-Jackson Atlanta International Airport (ATL) in Atlanta, Georgia, US, on Friday, July 12, 2024. 

    Elijah Nouvelage | Bloomberg | Getty Images

    Southwest Airlines is planning to reduce service to and from Atlanta next year, cutting more than 300 pilot and flight attendant positions, according to a company memo seen by CNBC.

    The changes come a day before Southwest’s investor day, when executives will map out the company’s plan to cut costs and grow revenue as pressure mounts from activist investor Elliott Investment Management.

    Southwest told staff it isn’t closing its crew base in Atlanta. Instead, it will reduce staffing by as many as 200 flight attendants and as many as 140 pilots, for the April 2025 bid month.

    The airline also isn’t laying the crews off, but they will likely have to bid to work from other cities.

    Read more CNBC airline news

    Southwest will reduce its Atlanta presence to 11 gates next year from 18, according to a separate memo from the pilots’ union.

    It will service 21 cities from Atlanta starting next April, down from 37 in March, the carrier said.

    “Although we try everything we can before making difficult decisions like this one, we simply cannot afford continued losses and must make this change to help restore our profitability,” Southwest said in its memo. “This decision in no way reflects our Employees’ performance, and we’re proud of the Hospitality and the efforts they have made and will continue to make with our Customers in ATL.”

    The unions that represent Southwest’s pilot and flight attendants railed against the airline for the staffing and service cuts.

    “Southwest Airlines management is failing Employees while impacting Customers. Management continues to make decisions that lack full transparency, sufficient communication with Union leadership, and most alarmingly, a lack of focus on what has made the airline great, the Employees,” said Bill Bernal, the flight attendants’ union president.

    A Southwest spokesman confirmed the changes and said the carrier will “continue to optimize our network to meet customer demand, best utilize our fleet, and maximize revenue opportunities.”

    Travelers check in at a Southwest counter at Hartsfield-Jackson Atlanta International Airport (ATL) in Atlanta, Georgia, US, on Tuesday, July 23, 2024.

    Elijah Nouvelage | Bloomberg | Getty Images

    The airline had already pulled out of certain airports, some of which it experimented with during the pandemic to focus on more profitable service.

    Southwest is not only facing changing booking patterns and oversupplied parts of the U.S. market but aircraft delays from Boeing, whose yet-to-be-certified 737 Max 7 airplanes are years behind schedule

    The airline’s COO, Andrew Watterson, told staff last week that it will have to make “difficult decisions” to boost profits.

    The reduction in Atlanta, the world’s busiest airport and Delta Air Lines home hub, is the latest development for the airline. In July, Southwest announced it plans to get rid of open seating and offer extra legroom on its airplanes, the biggest changes in its more than half-century of flying.

    Also on Wednesday, Southwest released an expanded schedule, selling tickets through June 4. In addition to the planned cuts in Atlanta, the carrier said it will boost service to and from Nashville, Tennessee. It will also start offering overnight flights from Hawaii, beginning April 8. Those include service from Honolulu to Las Vegas and Phoenix; Kona, Hawaii, to Las Vegas; and Maui, Hawaii, to Las Vegas and Phoenix.

    Don’t miss these insights from CNBC PRO

    [ad_2]

    Source link

  • American Airlines in talks to pick Citigroup over rival bank Barclays for crucial credit card deal, sources say

    American Airlines in talks to pick Citigroup over rival bank Barclays for crucial credit card deal, sources say

    [ad_1]

    An American Airlines’ Embraer E175LR (front), an American Airlines’ Boeing 737 (C) and an American Airlines’ Boeing 737 are seen parked at LaGuardia Airport in Queens, New York on May 24, 2024. 

    Charly Triballeau | AFP | Getty Images

    American Airlines is in talks to make Citigroup its exclusive credit card partner, dropping rival issuer Barclays from a partnership that dates back to the airline’s 2013 takeover of US Airways, said people with knowledge of the negotiations.

    American has been working with banks and card networks on a new long-term deal for months with the aim of consolidating its business with a single issuer to boost the revenue haul from its loyalty program, according to the people.

    Talks are ongoing, and the timing of an agreement, which would be subject to regulatory approval, is unknown, said the people, who declined to be identified speaking about a confidential process.

    Banks’ co-brand deals with airlines, retailers and hotel chains are some of the most hotly contested negotiations in the industry. While they give the issuing bank a captive audience of millions of loyal customers who spend billions of dollars a year, the details of the arrangements can make a huge difference in how profitable it is for either party.

    Big brands have been driving harder bargains in recent years, demanding a bigger slice of revenue from interest and fees, for example. Meanwhile, banks have been pushing back or exiting the space entirely, saying that rising card losses, scrutiny from the Consumer Financial Protection Bureau and higher capital costs make for tight margins.

    Airlines rely on card programs to help them stay afloat, earning billions of dollars a year from banks in exchange for miles that customers earn when they use their cards. Those partnerships were crucial during the pandemic, when travel demand dried up but consumers kept spending and earning miles on their cards. Carriers have said growth in card spending has far exceeded that of passenger revenue in recent years.

    While it says it has the largest loyalty program, American was out-earned by Delta there, which made nearly $7 billion in payments from its American Express card partnership last year, compared with $5.2 billion for American.

    “We continue to work with all of our partners, including our co-branded credit card partners, to explore opportunities to improve the products and services we provide our mutual customers and bring even more value to the AAdvantage program,” American said in a statement.

    Delays, regulatory risk

    It’s still possible that objections from U.S. regulators, including the Department of Transportation, could further delay or even scuttle a contract between American Airlines and Citigroup, leaving the current arrangement that includes Barclays intact, according to one of the people familiar with the process.

    If the deal between American and Citigroup is consummated, it would end an unusual partnership in the credit card world.

    Most brands settle with a single issuer, but when American merged with US Airways in 2013, it kept longtime issuer Citigroup on board and added US Airways’ card partner Barclays.

    American renewed both relationships in 2016, giving each bank specific channels to market their cards. Citi was allowed to pitch its cards online, via direct mail and airport lounges, while Barclays was relegated to on-flight solicitations.

    ‘Actively working’

    When the relationship came up for renewal again in the past year, Citigroup had good footing to prevail over the smaller Barclays.

    Run by CEO Jane Fraser since 2021, Citigroup has the more profitable side of the AA business; their customers tend to spend far more and have lower default rates than Barclays customers, one of the people said.

    Any renewal contract is likely to be seven to 10 years in length, which would give Citigroup time to recoup the costs of porting over Barclays customers and other investments it would need to make, this person said. Banks tend to earn most of the money from these arrangements in the back half of the deals.

    With this and other large partnerships, Fraser has been pushing Citigroup to aim bigger in a bid to improve the profitability of the card business, said the people familiar.  

    “We are always actively working with our partners, including American Airlines, to look for ways to jointly enhance customer products and drive shared value and growth,” a Citigroup spokesperson told CNBC.

    Meanwhile, Barclays executives told investors earlier this year that they aimed to diversify their co-branded card portfolio away from airlines, for instance, through added partnerships with retailers and tech companies.

    Barclays declined to comment for this article.

    [ad_2]

    Source link

  • U.S. airlines cool hiring after adding 194,000 employees in post-Covid spree

    U.S. airlines cool hiring after adding 194,000 employees in post-Covid spree

    [ad_1]

    A pilot performs a walkaround before a United Airlines flight

    Leslie Josephs/CNBC

    U.S. passenger airlines have added nearly 194,000 jobs since 2021 as companies went on a hiring spree after spending months in a pandemic slump, according to the U.S. Department of Transportation. Now the industry is cooling its hiring.

    Airlines are close to their staffing needs but the slowdown is also coming in part because they’re facing a slew of challenges.

    A glut of flights in the U.S. has pushed down fares and eaten into airlines’ profits. Demand growth has moderated. Airplanes are arriving late from Boeing and Airbus, prompting airlines to rethink their expansions. Engines are in short supply. Some carriers are deferring airplane deliveries altogether. And labor costs have climbed after groups like pilots and mechanics inked new contracts with big raises, their first in years.

    Annual pay for a three-year first officer on midsized equipment at U.S. airlines averaged $170,586 in March, up from $135,896 in 2019, according to Kit Darby, an aviation consultant who specializes in pilot pay.

    Since 2019, costs at U.S. carriers have climbed by double-digit percentages. Stripping out fuel and net interest expenses, they’ll be up about 20% at American Airlines this year and around 28% higher at both United Airlines and Delta Air Lines from 2019, according to Raymond James airline analyst Savanthi Syth.

    It is more pronounced at low-cost airlines. Southwest Airlines‘ costs will likely be up 32%, JetBlue Airways‘ up nearly 35% and Spirit Airlines will see a rise of almost 39% over the same period, estimated Syth, whose data is adjusted for flight length.

    Easing hiring

    Friday’s U.S. jobs report showed air transportation employment in August roughly in line with July’s.

    But there have been pullbacks. In the most severe case, Spirit Airlines furloughed 186 pilots this month, their union said Sunday, as the carrier’s losses have grown in the wake of a failed acquisition by JetBlue Airways, a Pratt & Whitney engine recall and an oversupplied U.S. market. Last year, even before the merger fell apart, it offered staff buyouts.

    Other airlines are easing hiring or finding other ways to cut costs.

    Frontier Airlines is still hiring pilots but said it will offer voluntary leaves of absence in September and October, when demand generally dips after the summer holidays but before Thanksgiving and winter breaks. A spokeswoman for the carrier said it offers those leaves “periodically” for “when our staffing levels exceed our planned flight schedules.”

    Southwest Airlines expects to end the year with 2,000 fewer employees compared with 2023 and earlier this year said it would halt hiring classes for work groups including pilots and flight attendants. CFO Tammy Romo said on an earnings call in July that the company’s headcount would likely be down again in 2025 as attrition levels exceed the Dallas-based carrier’s “controlled hiring levels.”

    United Airlines, which paused pilot hiring in May and June, citing late-arriving planes from Boeing, said it plans to add 10,000 people this year, down from 15,000 in each 2022 and 2023. It plans to hire 1,600 pilots, down from more than 2,300 last year.

    It’s a departure from the previous years when airlines couldn’t hire employees fast enough. U.S. airlines are usually adding pilots constantly since they are required to retire at age 65 by federal law.

    Airlines shed tens of thousands of employees in 2020 to try to stem record losses. Packages of more than $50 billion in taxpayer aid that were passed to get the industry through its worst-ever crisis prohibited layoffs, but many employees took carriers up on their repeated offers of buyouts and voluntary leaves.

    Then, travel demand snapped back faster than expected, climbing in earnest in 2022 and leaving airlines without experienced employees like customer service agents. It also led to the worst pilot shortage in recent memory.

    In response, companies — especially regional carriers — offered big bonuses to attract pilots.

    But times have changed. Even air freight giants were competing for pilots in recent years but demand has waned as FedEx and UPS look to cut costs.

    American Airlines CEO Robert Isom said in an investor presentation in March that the carrier added about 2,300 pilots last year and that it expects to hire about 1,300 this year.

    “We will be hiring for the foreseeable future at levels like that,” he said at the time.

    Despite the lower targets, students continue to fill classrooms and cockpits to train and build up hours to become pilots, said Ken Byrnes, chairman of the flight department at Embry-Riddle Aeronautical University.

    “Demand for travel is still there,” he said. “I don’t see a long-term slowdown.”

    Read more CNBC airline news

    [ad_2]

    Source link

  • 5 things to know before the stock market opens Thursday

    5 things to know before the stock market opens Thursday

    [ad_1]

    Here are five key things investors need to know to start the trading day:

    1. Big new number

    The S&P 500 hit a fresh new milestone on Wednesday, closing above 5,600 for the first time ever thanks to a rise in semiconductor stocks. The broad market index jumped 1.02%, and marked a seventh straight day of gains. The Nasdaq Composite, meanwhile, climbed 1.18% and also hit a new all-time high, while the Dow Jones Industrial Average joined the trend, adding 429.39 points, or 1.09%. Chip stocks led the day, with Taiwan Semiconductor rising 3.5% and Nvidia adding 2.7%, while Qualcomm and Broadcom rose about 0.8% and 0.7%, respectively. Follow live market updates.

    2. Earnings season takes off

    Budrul Chukrut | Lightrocket | Getty Images

    Delta shares tumbled nearly 10% in premarket trading Thursday morning after the airline kicked off earnings season with a forecast that fell short of analysts’ estimates. Delta forecast record revenue for the third quarter, thanks to booming summer travel demand, but it expects to grow its flying capacity by 5% to 6% compared with last year, slower than the 8% it had expected in the second quarter. Airlines are seeing travel demand break records, but profits have lagged as the industry faces higher costs. Meanwhile, Delta also reported earnings in line with expectations and adjusted revenue of $15.41 billion, slightly less than the $15.45 billion expected, based on consensus estimates from LSEG.

    3. One ring

    An attendee films Samsung Electronics’ Galaxy Smart Ring during its unveiling ceremony in Seoul, South Korea, July 8, 2024. 

    Kim Hong-ji | Reuters

    Samsung wants to put a ring on it. The tech giant launched the Galaxy Ring on Wednesday, a lightweight “smart ring” equipped with sensors designed for health monitoring 24 hours a day. The ring starts at $399.99. The announcement follows rival Apple‘s push into that space and comes as users hold onto smartphones for longer, inspiring device makers to look for add-on electronics products. Among other things, Samsung also unveiled its latest foldable smartphones, which are packed with AI features, at an event in Paris. The Samsung Galaxy Z Fold6 starts at $1,899.99 and opens like a book to have a bigger screen, while the Z Flip6 is a more traditional flip phone with a bendable screen and starts at $1,099.99.

    4. Not the spot

    Pavlo Gonchar | Lightrocket | Getty Images

    Shares of software company Hubspot plunged 12% Wednesday after Bloomberg reported that Google parent Alphabet has shelved plans to buy the company. Alphabet expressed its interest in a deal earlier this year, “but the sides didn’t reach a point of detailed discussions about due diligence,” according to the report, which cited people with knowledge of the matter. Hubspot, which makes software that other companies use to automate marketing and reach prospective customers, has reported strong revenue growth and sales in recent quarters. An acquisition would have helped Google grow revenue from its business software and cloud infrastructure, but U.S. regulators have been pushing back on deals involving Big Tech companies.

    5. Costs go up

    Customers enter a Costco Wholesale Corp. warehouse store in Hawthorne, California, on June 12, 2024. 

    Patrick T. Fallon | Afp | Getty Images

    Costco is going to cost more. The retailer said Wednesday that the price of a standard annual membership would rise by $5, to $65 from $60, in the U.S. and Canada starting Sept. 1. The higher tier of its membership, the “Executive Plan” would increase by $10, to $130 a year from $120. It’s the first time in seven years that Costco has raised its membership fees and has delayed its usual timeline of upping the price every five and a half years as consumers dealt with high inflation.

    — CNBC’s Brian Evans, Leslie Josephs, Arjun Kharpal, Jordan Novet, Jennifer Elias and Melissa Repko contributed to this report.

    Follow broader market action like a pro on CNBC Pro.

    [ad_2]

    Source link

  • Delta goes pasta-only for thousands of international travelers after ‘spoiled’ food forced a flight to divert

    Delta goes pasta-only for thousands of international travelers after ‘spoiled’ food forced a flight to divert

    [ad_1]

    A Boeing 767 passenger aircraft of Delta Air Lines arrives from Dublin at JFK International Airport in New York as the Manhattan skyline looms in the background on Feb. 7, 2024.

    Charly Triballeau | Afp | Getty Images

    Delta Air Lines pulled some meal options from dozens of international flights on Wednesday hours after the carrier said reports of “spoiled” food on an Amsterdam-bound flight forced the plane to divert to New York.

    Delta was only serving pasta in the main cabin on about 75 international flights on Wednesday. It wasn’t clear if the menu changes would continue on Thursday.

    “Out of an abundance of caution, Delta teams have proactively adjusted our in-flight meal service on a number of international flights on Wednesday, July 3,” a Delta spokeswoman said in a statement to CNBC.

    Delta apologized to customers over the report of spoiled food in the main cabin on the Detroit-to-Amsterdam flight.

    “This is not the service Delta is known for and we sincerely apologize to our customers for the inconvenience and delay in their travels,” Delta said.

    In an email to staff on Wednesday, Ash Dhokte, who leads onboard service at Delta, said the airline is investigating what went wrong and that “immediate corrective actions have been implemented to avoid recurrence.” 

    Do&Co., a Delta caterer, did not immediately respond to a request for comment.

    “As our last line of defense, please examine the dish before serving it and do not serve any food that may have a contaminant,” Dhokte wrote, noting that onboard food safety incidents are “extremely rare.”

    The incident occurred in the midst of the peak summer travel season, when Delta and its rivals are fighting over travelers. Airlines serve thousands of meals a day to customers and such incidents are rare, said Henry Harteveldt, a travel consultant and founder of Atmosphere Research Group.

    “Delta is taking prudent action. When you have a food scare you don’t want anyone getting sick on a plane,” said Harteveldt. “Going to all pasta is the safest and smartest option.”

    The airline industry is facing another challenge: a possible strike by workers at major inflight caterer Gate Gourmet. Federal mediators released Gate Gourmet and its unions from mediation earlier this week, paving the way for a potential strike at the end of July.

    “Gate Gourmet caters for us at 19 domestic stations and we are reviewing strategies to limit disruptions for you and our customers should an interruption occur,” Delta’s Dhokte said in the staff note Wednesday.

    [ad_2]

    Source link

  • Wall Street gets key inflation data next week amid concerns the stock market is overbought

    Wall Street gets key inflation data next week amid concerns the stock market is overbought

    [ad_1]

    [ad_2]

    Source link

  • Companies — profitable or not — make 2024 the year of cost cuts

    Companies — profitable or not — make 2024 the year of cost cuts

    [ad_1]

    Mathisworks | Digitalvision Vectors | Getty Images

    Corporate America has a message for Wall Street: It’s serious about cutting costs this year.

    From toy and cosmetics makers to office software sellers, executives across sectors have announced layoffs and other plans to slash expenses — even at some companies that are turning a profit. Barbie maker Mattel, PayPal, Cisco, Nike, Estée Lauder and Levi Strauss are just a few of the firms that have cut jobs in recent weeks.

    Department store retailer Macy’s said it will close five of its namesake department stores and cut more than 2,300 jobs. JetBlue Airways and Spirit Airlines have offered staff buyouts, while United Airlines cut first-class meals on some of its shortest flights.

    As consumers watch their wallets, companies have felt pressure from investors to do the same. Executives have sought to show shareholders that they’re adjusting to consumer demand as it returns to typical patterns or even softens, as well as aggressively countering higher expenses.

    Airlines, automakers, media companies and package giant UPS are all digesting new labor contracts that gave raises to tens of thousands of workers and drove costs higher.

    Companies in years past could get away with passing on higher costs to customers who were willing to splurge on everything from new appliances to beach vacations. But businesses’ pricing power has waned, so executives are looking for other ways to manage the budget — or squeeze out more profits, said Gregory Daco, chief economist for EY.

    “You are in an environment where cost fatigue is very much part of the equation for consumers and business leaders,” Daco said. “The cost of most everything is much higher than it was before the pandemic, whether it’s goods, inputs, equipment, labor, even interest rates.”

    There are some exceptions to the recent cost-cutting wave: Walmart, for example, said last month that it would build or convert more than 150 stores over the next five years, along with a more than $9 billion investment to modernize many of its current stores.

    And some companies, such as banks, already made deep cuts. Five of the largest banks, including Wells Fargo and Goldman Sachs, together eliminated more than 20,000 jobs in 2023. Now, they’re awaiting interest rate cuts by the Federal Reserve that would free up cash for pent-up mergers and acquisitions.

    But cost reductions unveiled in even just the first few weeks of the year amount to tens of thousands of jobs and billions of dollars. In January, U.S. companies announced 82,307 job cuts, more than double the number in December, while still down 20% from a year ago, according to Challenger, Gray and Christmas.

    And the tightening of months prior is already showing up in financial reports.

    So far this earnings season, results have indicated that companies have focused on driving profits higher without the tailwind of big price increases and sales growth.

    As of mid-February, more than three-quarters of the S&P 500 had reported fourth-quarter results, with far more earnings beats than revenue beats. The quarter’s earnings, measured by a composite of S&P 500 companies, are on pace to rise nearly 10%. Revenues, however, are up a more modest 3.4%.

    Layoffs, flight cuts and store closures

    While companies’ drive for higher profits isn’t new, they have made bolstering the bottom line a priority this year.

    Downsizing has rippled across the tech industry, as companies followed the lead of Meta’s 2023 cuts, which many analysts credited with helping the social media giant rebound from a rough 2022. CEO Mark Zuckerberg had dubbed 2023 the “year of efficiency” for the parent of Facebook and Instagram, as it slashed the size of its workforce and vowed to carry forward its leaner approach.

    In recent weeks, Amazon, Alphabet, Microsoft and Cisco, among others, have announced staffing reductions.

    And the layoffs haven’t been contained to tech. UPS said it was axing 12,000 jobs, saving the company $1 billion, CEO Carol Tome said late last month, citing softer demand. Many of the largest retail, media and entertainment companies have also announced workforce reductions, in addition to other cuts.

    Warner Bros. Discovery has slashed content spending and headcount as part of $4 billion in total cost savings from the merger of Discovery and WarnerMedia. Disney initially promised $5.5 billion in cost reductions in 2023, fueled by 7,000 layoffs. The company has since increased its savings promise to $7.5 billion, and executives suggested in its Feb. 7 quarterly earnings report that it may exceed that target.

    Last week, Paramount Global announced hundreds of layoffs in an effort to “operate as a leaner company and spend less,” according to CEO Bob Bakish. Comcast’s NBCUniversal, the parent company of CNBC, has also recently eliminated jobs.

    JetBlue Airways, which hasn’t posted an annual profit since before the pandemic, is deferring about $2.5 billion in capital expenditures on new Airbus planes to the end of the decade, culling unprofitable routes and redeploying aircraft in addition to the worker buyouts.

    Delta Air Lines, which is profitable, in November said it was cutting some office jobs, calling it a “small adjustment.”

    Some cuts are even making their way to the front of the cabin. United Airlines, which also posted a profit in 2023, at the start of this year said it would serve first-class meals only on flights more than 900 miles, up from 800 miles previously. “On flights that are 301 to 900 miles, United First customers can expect an offering from the premium snack basket,” according to an internal post.

    Several of the country’s largest automakers, such as General Motors and Ford Motor, have lowered spending by billions of dollars through reduced or delayed investments on all-electric vehicles. The U.S.-based companies as well as others, such as Netherlands-based Stellantis, have recently reduced headcount and payroll through voluntary buyouts or layoffs.

    Even Chipotle, which reported more foot traffic and sales at its restaurants in the most recently reported quarter, is chasing higher productivity by testing an avocado-scooping robot called the Autocado that shortens the time it takes to make guacamole. It’s also testing another robot that can put together burrito bowls and salads. The robots, if expanded to other stores, could help cut costs by minimizing food waste or reducing the number of workers needed for those tasks.

    Shifting patterns

    Industry experts have chalked up some recent cuts to companies catching their breath — and taking a hard look at how they operate — after an unusual four-year stretch caused by the pandemic and its fallout.

    EY’s Daco said the past few years have been marked by a mismatch in supply and demand when it comes to goods, services and even workers.

    Customers went on shopping sprees, fueled by government stimulus and less experience-related spending. Airlines saw demand disappear and then skyrocket. Companies furloughed workers in the early pandemic and then struggled to fill jobs.

    He said he expects companies this year to “search for an equilibrium.”

    “You’re seeing a rebalancing happening in the labor markets, in the capital markets,” he said. “And that rebalancing is still going to play out and gradually lead to a more sustainable environment of lower inflation and lower interest rates, and perhaps a little bit slower growth.”

    The auto industry, for example, faced a supply issue during much of the Covid pandemic but is now facing a potential demand problem. Inventories of new vehicles are rising — surpassing 2.5 million units and 71 days’ supply toward the end of 2023, up 57% year over year, according to Cox Automotive — forcing automakers to extend more discounts in an effort to move cars and trucks off dealer lots.

    Automakers have also been contending with slower-than-expected adoption of EVs.

    David Silverman, a retail analyst at Fitch Ratings, said companies are “feeling a bit heavy as sales growth moderates and maybe even declines.”

    Cost cuts at UPS, Hasbro and Levi all followed sales declines in the most recent fiscal quarter. Macy’s, which reports earnings later this month, has said it expects same-store sales to drop, and there’s early evidence that may come to bear: Consumers pulled back on spending in January, with retail sales falling 0.8%, more than economists expected, according to the latest federal data.

    Most major retailers, including Walmart, Target and Home Depot, will report earnings in the coming weeks.

    Credit ratings agency Fitch said it doesn’t expect the U.S. economy to tip into recession, but it does anticipate a continued pullback in discretionary spending.

    “Part of companies’ decision to lower their expense structure is in line with their views that 2024 may not be a fantastic year from a top-line-growth standpoint,” Silverman said.

    Plus, he added, companies have had to find cash to fund investments in newer technology such as infrastructure that supports e-commerce, a resilient supply chain or investments in artificial intelligence.

    Forward momentum

    Companies may have another reason to cut costs now, too. As they see other companies shrinking the size of their workforces or budgets, there’s safety in numbers.

    Or as Silverman noted, “layoffs beget layoffs.”

    “As companies have started to announce them it becomes normalized,” he said. “There’s less of a stigma.”

    Even with rolling layoffs, the labor market remains strong, which may help explain why Wall Street has by and large rewarded those companies that have found areas to save and returned profits to shareholders.

    Shares of Meta, for example, almost tripled in price in 2023 in that “year of efficiency,” making the stock the second-best gainer in the S&P 500, behind only Nvidia. After laying off more than 20,000 workers in 2023, Meta on Feb. 2 announced its first-ever dividend and said it expanded its share buyback authorization by $50 billion.

    UPS, fresh from job cuts, said it would raise its quarterly dividend by a penny.

    Overall, dividends paid by companies in the S&P 500 rose 5.05% last year, according to Howard Silverblatt, senior index analyst at S&P Dow Jones Indices, and he estimated they will likely increase nearly 5.3% this year.

    — CNBC’s Michael Wayland, Alex Sherman, Robert Hum, Amelia Lucas and Jonathan Vanian contributed to this story.

    Disclosure: Comcast owns NBCUniversal, the parent company of CNBC.

    [ad_2]

    Source link

  • How Denver International Airport became one of the fastest-growing airports in the world

    How Denver International Airport became one of the fastest-growing airports in the world

    [ad_1]

    Last year was Denver International Airport’s busiest on record.

    While airline stocks have yet to fully recover to pre-pandemic levels, passengers have returned in droves — and millions of them are flying through the Colorado hub.

    “We will end 2023 much higher than our forecast at about 78 million passengers annually,” said Phil Washington, CEO of the Denver International Airport. “So this has been tremendous growth.”

    The airport, known as DIA to Colorado locals, opened in 1995. It was originally built to handle 50 million passengers per year, but now that number is expected to reach more than 100 million people per year by 2027, according to DIA estimates.

    OAG, a global travel data provider, said Denver went from the 21st busiest airport in the world in 2019 to the sixth in 2023. 

    United Airlines is Denver’s biggest operator with 46.7% market share, followed by Southwest at 30.7% and Frontier Airlines at 9.7%, according to DIA.

    The midcontinent airport has become United’s busiest hub. It recently invested nearly $1 billion in Denver to add more gates, flights and destinations, and opened the largest lounge in its network.

    “About 60% of our customers are connecting from other places. Forty percent of our customers are local Denver, and it’s a fast growing city,” said Jonna McGrath, vice president of Denver Airport operations for United Airlines. “We want to grow before 2030 to about 650 flights a day.”

    CNBC got a behind-the-scenes look at United’s Denver operations and explored how the airport and the airline plan to keep up with demand.

    Watch the video to learn more.

    [ad_2]

    Source link

  • Judge blocks JetBlue-Spirit merger after DOJ's antitrust challenge

    Judge blocks JetBlue-Spirit merger after DOJ's antitrust challenge

    [ad_1]

    LaGuardia International Airport Terminal A for JetBlue and Spirit Airlines in New York.

    Leslie Josephs | CNBC

    A federal judge Tuesday blocked JetBlue Airways‘ purchase of Spirit Airlines after the Justice Department sued to stop the merger, saying the deal would drive up fares for price-sensitive consumers by taking the discount carrier out of the market.

    JetBlue’s proposed $3.8 billion purchase of discounter Spirit would have produced the country’s fifth-largest airline, a deal the carriers had said would help them better grow and compete against larger rivals like Delta and United.

    “JetBlue plans to convert Spirit’s planes to the JetBlue layout and charge JetBlue’s higher average fares to its customers,” U.S. District Court Judge William Young wrote in his decision. “The elimination of Spirit would harm cost-conscious travelers who rely on Spirit’s low fares.”

    The decision, handed down Tuesday, marks a victory for a Justice Department that has aggressively sought to block deals it views as anti-competitive.

    “Today’s ruling is a victory for tens of millions of travelers who would have faced higher fares and fewer choices had the proposed merger between JetBlue and Spirit been allowed to move forward,” Attorney General Merrick Garland said in a statement. “The Justice Department will continue to vigorously enforce the nation’s antitrust laws to protect American consumers.”

    The DOJ alleged in its lawsuit, filed in March, that JetBlue’s acquisition of the budget airline would force many passengers to pay higher fares by eliminating Spirit and “about half of all ultra-low-cost airline seats in the industry.”

    Spirit has grown rapidly in recent years by offering cheap fares and fees for everything else from seat assignments to carry-on luggage, a no-frills model that has become a favorite punchline for late-night comedians.

    “Spirit is a small airline. But there are those who love it,” Young, who was appointed by former President Ronald Reagan, wrote in his ruling. “To those dedicated customers of Spirit, this one’s for you.”

    Spirit shares plunged after the ruling and ended the day down 47%, while JetBlue’s stock gained about 5%.

    Spirit’s market capitalization as of Friday’s close was $1.66 billion, less than half of JetBlue’s proposed purchase price. The Miramar, Florida-based airline has been struggling with grounded airplanes due to an engine manufacturing issue and softer-than-expected travel demand.

    Stock Chart IconStock chart icon

    Spirit Airlines and JetBlue Airways stock after a federal judge blocked the carrier’s proposed merger.

    JetBlue and Spirit said in a joint statement that they disagreed with the ruling and were evaluating next steps.

    “We continue to believe that our combination is the best opportunity to increase much needed competition and choice by bringing low fares and great service to more customers in more markets while enhancing our ability to compete with the dominant U.S. carriers,” the carriers said.

    A different U.S. District Court judge in Massachusetts sided with the Justice Department last year to block JetBlue’s regional alliance with American Airlines in the Northeast, a partnership that allowed the carriers to coordinate routes and schedules.

    JetBlue and Spirit said Tuesday that “JetBlue’s termination of the Northeast Alliance and commitment to significant divestitures have removed any reasonable anti-competitive concerns that the Department of Justice raised.”

    Hard-won deal

    JetBlue fought hard for Spirit. It launched a hostile takeover bid weeks after Frontier Airlines and Spirit agreed to merge in a cash-and-stock deal. Frontier’s business model is more similar to Spirit’s, and both airlines have similar fleet configurations, unlike JetBlue’s more full-service model which stands in contrast to Spirit’s discount strategy.

    After Spirit’s board rejected JetBlue’s initial takeover offer, Spirit CEO Ted Christie said in May 2022 that he didn’t think a JetBlue deal would be approved by regulators, citing the American Airlines partnership and JetBlue’s plan to take seats out of the market.

    “It will not happen in our opinion and for that reason our board has rejected it and to imply otherwise again, we think is insulting,” he said on CNBC’s “Squawk Box” at the time.

    Spirit shareholders ended up rejecting the Frontier deal and months later approving a sweetened JetBlue proposal in October 2022.

    New CEO

    Young’s decision leaves New York-based JetBlue grappling with next steps, tasking incoming CEO Joanna Geraghty with steering the airline on a new path. Geraghty was announced as successor to CEO Robin Hayes after he said earlier this month that he would retire.

    JetBlue argued access to Spirit’s similar fleet of Airbus planes would allow it to grow quickly when planes and pilots are in short supply, growth it said it needs to compete against bigger airlines. The carrier operates in highly congested airspace in New York and other cities, and had planned to use Spirit as a way to gain access to more routes and travelers.

    Years of previous consolidation left United, Delta, American and Southwest in control of about three-quarters of the domestic market.

    JetBlue planned to remodel Spirit’s yellow planes by removing the branding and seats from the tightly packed jets to provide more of a full-service model.

    “Although Spirit’s yellow aircraft livery would not immediately be repainted as JetBlue planes, at the moment the merger is consummated, Spirit and JetBlue would no longer be competitors,” Young wrote in his decision.

    Don’t miss these stories from CNBC PRO:

    [ad_2]

    Source link

  • Flight cancellations pile up as winter storm, 737 Max 9 grounding disrupt travel

    Flight cancellations pile up as winter storm, 737 Max 9 grounding disrupt travel

    [ad_1]

    An Embraer E175LR passengers aircraft of American Eagles airlines (C) taxxing before take-off to Pittsburg is seen at La Guardia Airport on January 9, 2024.

    Charly Triballeau | Afp | Getty Images

    Airlines canceled about 2,000 U.S. flights Friday as they grapple with winter weather and the grounding of Boeing 737 Max 9 planes. 

    Storms in the Midwest helped drive more than 4,500 delays, with major disruptions around Chicago and Detroit, major hubs for the largest U.S. carriers, according to flight-tracker FlightAware.

    About 40% of flights at Chicago’s O’Hare International Airport, a hub for United Airlines and American Airlines, were canceled after a snowstorm led to an over two-hour ground stop. Detroit Metropolitan Wayne County Airport, a hub for Delta Air Lines, had about 20% of flights Friday either delayed or canceled due to the storms.

    Southwest Airlines, which has a big operation out of Chicago Midway, canceled more than 400 flights, while more than 900 were delayed.

    United canceled about 10% of its mainline flights and delayed about 20%.

    Last week, the Federal Aviation Administration grounded Boeing 737 Max 9s after a door plug blew off an Alaska Airlines flight, so the jets can undergo inspections. That grounding has continued to disrupt travel for both United and Alaska Airlines, the only two U.S. airlines that operate the aircraft.

    Alaska Airlines said Friday it would cancel all flights on the Max 9 through Sunday as it waits for documentation from Boeing and the FAA to begin inspections.

    About 20% of the carrier’s flights were canceled Friday and more than 10% were delayed, FlightAware data showed. Alaska said that between 110 and 150 flights per day would be impacted by the grounding of the Max 9. 

    “We regret the significant disruption that has been caused for our guests by cancellations due to these aircraft being out of service,” the company said.

    [ad_2]

    Source link

  • Cramer's week ahead: Earnings season kicks off after JPMorgan Healthcare Conference

    Cramer's week ahead: Earnings season kicks off after JPMorgan Healthcare Conference

    [ad_1]

    CNBC’s Jim Cramer on Friday told investors what to watch for on Wall Street next week, highlighting JPMorgan‘s market-moving health-care conference in San Francisco. Taking place from Monday to Thursday, the conference is one of the year’s largest gatherings of major industry CEOs where they reveal earnings guidance and updates on clinical trial research.

    “The new year has started with a redistribution of cash out of the ‘Magnificent Seven’ and on to the sidelines,” Cramer said, pointing to health-care stocks as a particularly notable group that will likely be “propelled by what people expect to hear from the JPMorgan Healthcare Conference.”

    Cramer will interview several CEOs at the conference, starting with Walgreens CEO Tim Wentworth on Monday. Cramer said he’s interested to hear how the company plans to get its groove back after cutting its dividend nearly in half this week. Cramer will also speak with leadership from Amgen and Medtronic, as well as the new CEO of Bristol Myers, Chris Boerner, whom he’ll ask about the company’s rigorous biotech acquisition plans.

    On Tuesday and Wednesday, Cramer will continue to interview the CEOs of major industry names, including Eli Lilly CEO David Ricks. Cramer said he’s particularly interested in the company’s diabetes and weight loss drug as well as its Alzheimer’s initiative. He’ll also speak with CVS Health CEO Karen S. Lynch to discuss the company’s ongoing transition from drug store to health-care provider. Cramer will also hear from the CEOs of Pfizer, Regeneron, Novartis, Abbott Labs and Cencora.

    Thursday brings the consumer price index for December. Cramer said he thinks those hoping for soft figures will be disappointed. Cramer will also be tuning into CES, the Consumer Electronics Show, next week. The tech event will include commentary by leadership from Nvidia and Dell.

    Earnings season kicks off Friday with reports from major banks including JPMorgan, Bank of America and Wells Fargo. BlackRock will also report, and Cramer said he thinks the company’s earnings could give investors a solid overview of the financial industry. He’ll also be paying attention to Friday reports from UnitedHealth Group and Delta.

    Jim Cramer talks what's ahead for the markets next week

    Jim Cramer’s Guide to Investing

    Sign up now for the CNBC Investing Club to follow Jim Cramer’s every move in the market.

    Disclaimer The CNBC Investing Club Charitable Trust holds shares of Eli Lilly.

    Questions for Cramer?
    Call Cramer: 1-800-743-CNBC

    Want to take a deep dive into Cramer’s world? Hit him up!
    Mad Money TwitterJim Cramer TwitterFacebookInstagram

    Questions, comments, suggestions for the “Mad Money” website? madcap@cnbc.com

    [ad_2]

    Source link

  • Southwest, pilots' union near a preliminary labor deal, the last of the major U.S. airlines

    Southwest, pilots' union near a preliminary labor deal, the last of the major U.S. airlines

    [ad_1]

    Southwest Airlines Boeing 737-700 aircraft is seen landing at dusk time at Ronald Reagan Washington National Airport in Arlington, Virginia.

    Nicolas Economou | Nurphoto | Getty Images

    Southwest Airlines and its pilots’ union are closing in on a new contract that would raise pay for the carrier’s more than 11,000 aviators and end months of contentious negotiations, weeks ahead of the crucial holiday travel season.

    The company and the union have agreed on pay, retirement and other items but are working on an implementation schedule, the Southwest Airlines Pilots Association said in a message to its members on Thursday.

    Delta Air Lines, United Airlines and American Airlines have already finalized multibillion-dollar labor agreements with pilots this year as unions pushed for pay hikes, better scheduling and other improvements after the Covid pandemic derailed contract talks.

    If a preliminary agreement is approved by Southwest pilots’ union board in the coming weeks, it would then go to pilots for a ratification vote.

    The union and the airline declined to provide specifics of the deal.

    Southwest and the union “are working hard to close out the few remaining items,” an airline spokesman told CNBC. “Southwest remains committed to reaching an agreement that rewards our Pilots and places them competitively in the industry.”

    Southwest reached a preliminary agreement with its flight attendants’ union earlier this fall that includes 36% pay increases for cabin crew members.

    A labor deal with its pilots would end a period of tense negotiations between the company and the union, which recently included laying groundwork for a potential strike, though strikes are extremely rare in the airline industry.

    It would also become the latest in a string of big labor deals this year, including agreements between Hollywood writers, actors and studios as well as between automakers and the United Auto Workers union, following strikes.

    [ad_2]

    Source link

  • 10 oldest airlines in the world | CNN

    10 oldest airlines in the world | CNN

    [ad_1]

    Editor’s Note: Sign up for Unlocking the World, CNN Travel’s weekly newsletter. Get the latest news in aviation, food and drink, where to stay and other travel developments.



    CNN
     — 

    The aviation industry might be known for its volatility and financial instability, particularly in recent years, but a surprising number of airlines from the pioneering early days of commercial flight are still surviving in their original form.

    Finnish flag carrier Finnair celebrates its 100th anniversary on November 1, having been founded in 1923 as a seaplane service, while the Czech Republic’s flag carrier Czech Airlines made its first flight just a few days earlier in October 2023.

    Here are 10 of the oldest airlines in the world still in operation.

    Year of foundation: 1919

    First flight: May 1920

    Passengers transported in the first year: 440

    Passengers transported in 2022: 25.8 million

    As a nation that once had the largest merchant fleet in the world, it seems fitting that the Dutch were among the first to set up a national airline that became a strong force to be reckoned with.

    The need to connect Amsterdam to what was then known as the Dutch East Indies would certainly have been a powerful motivation to get KLM off the ground in the early days.

    Although formally founded in October 1919, the new airline did not really take off until May 1920, when a four-seater De Havilland DH.16 made the inaugural flight to London’s now defunct Croydon Airport.

    In 1924, KLM launched a service from Amsterdam to Batavia (as Jakarta was then known), the world’s longest air route at the time.

    In 1946, it became the first European airline to begin scheduled flights to New York, using DC-4 aircraft.

    Throughout its century and more of existence, KLM’s commitment to innovation has been constant.

    This doesn’t just apply to its fleet either. The airline has also proved pioneering with its use of social media, introducing the first social media-driven flight schedule.

    Year of foundation: 1919

    First flight: 1919

    Passengers transported in 2022: 24.6 million

    Founded by German immigrants in Barranquilla, Colombia, in 1919, Avianca was originally named SCADTA and operated Junkers F13 aircraft, some of which were equipped with floats.

    As the world moved closer to war In the late 1930s, SCADTA became a source of concern for the US government, who were worried about the security implications of the airline’s links to Germany.

    Pan American World Airways subsequently acquired a controlling stake in the company.

    In 1949, SCADTA merged with fellow Colombian airline SACO (Servicio Aéreo Colombiano) and adopted its current name.

    Today, after absorbing several airlines in neighboring countries, Avianca is one of the largest airline groups in Latin America, with a fleet of more than 130 aircraft and a network of subsidiaries that spans pretty much the whole continent.

    The Qantas logo is known as

    Year of foundation: 1920

    Passengers transported in 2022: 21.3 million

    Few people outside of Australia know that Qantas stands for “Queensland and Northern Territory Aerial Services.”

    As its name indicates, the initial goal of the airline was to service the tropical and sparsely populated lands of Northern Australia.

    Its first aircraft was an Avro 504, a pre-World War I biplane that could seat a pilot and one passenger.

    Qantas was nationalized by the Australian government after World War II and reprivatized in the ’90s.

    Its kangaroo livery first appeared in 1944 and accompanied the airline during the airline’s expansion throughout the Asia-Pacific region and beyond.

    Today Qantas remains the de facto flag carrier of Australia as well as the country’s largest airline and one of its best known brands globally.

    Aeroflot was the largest airline in the world during the Soviet era.

    Year of foundation: 1923

    First flight: July 1923

    Passengers transported in 2022: 20.5 million

    A flight from Moscow to Nizhny Novgorod carrying six people (four passengers and two crewmen) on a Junkers F13 marked the start of what would turn out to be the Soviet Union’s, and later, the Russian Federation’s flag carrier.

    Originally called Dobrolet, it was renamed Aeroflot in 1932, when the Soviet government decided to place the whole civilian aviation fleet under one single entity.

    After World War II, Aeroflot became the largest airline in the world, as air travel was often the only means of transportation available to bridge the vast expanses of the Soviet Union.

    In 1956, the airline introduced the Tupolev Tu-104, considered the first truly successful jet airliner.

    During the Cold War years, Aeroflot operated the long range Il-62, which flew all the way to Cuba by way of Murmansk, in the Arctic, and the supersonic Tupolev Tu-144, the Soviet Union’s answer to the Concorde.

    In much the same fashion as the Soviet Union, Aeroflot was separated in the ’90s and divided into a number of regional airlines, with some former Soviet republics beginning their own services.

    The core of the airline then came under control of Russia and remains state-owned.

    Aeroflot underwent a massive transformation during the first decade of the 21st century in terms of both service and fleet.

    Bar its hammer and sickle logo, the Aeroflot of today bears little resemblance to its original conception.

    Czech Airlines, the national airline of the Czech Republic.

    Year of foundation: 1923

    First flight: October 1923

    Passengers transported in 2022: No data

    Started as a national airline for the then newly founded country of Czechoslovakia, Czech Airlines’ activity was interrupted by World War II and the airline was later reinstated by the post-war Communist government.

    In 1957, CSA became the third airline, after BOAC and Aeroflot, to operate jet airliners when it put the Soviet-made Tupolev Tu104A into service.

    The airline was also the first to operate a jet-only connection: Prague to Moscow.

    During the Cold War years, CSA operated a remarkably large operation that included a fleet of up to 21 long range Ilyushin Il-62 aircraft as well as an extensive route network covering the Americas, Africa, the Middle East and Asia.

    Unfortunately it also suffered two unfortunate firsts, becoming the first airline to suffer a mass hijacking, when three of its aircraft were diverted to West Germany by defectors in 1950.

    It was also the first airline to lose a captain at the hands of a hijacker, in an incident during the 1970s.

    Like many national airlines of the former Eastern Bloc, CSA was renamed, restructured and modernized during the ’90s.

    The airline has scraped through to its 100th anniversary after being declared bankrupt in 2021, having been hit hard by the Covid-19 pandemic. It’s now gone through a reorganization process with a new investor, Prague City Air.

    Finnair's 100th anniversary is November 1, 2023.

    Year of foundation: 1923

    First flight: March 1924

    Passengers transported in 2022: 9.1 million

    For those who’ve ever wondered why Finnair’s airline code is “AY”, this is derived from the name it used before being rebranded to Finnair in 1953 – “Aero O/Y.”

    During its first 12 years, the airline operated only seaplanes, a logical choice given the many lakes and water inlets that cover the surface of Finland.

    In 1983, it became the first European airline to fly non-stop to Tokyo, with DC-10 aircraft.

    Five years later, Finnair was the only European airline with a direct flight between Europe and China.

    This helped to position the airline as the shortest gateway between Europe and Asia, largely thanks to Helsinki’s location atop the Great Circle route.

    Delta is the oldest airline still operating in the US.

    Year of foundation: 1924

    Passengers transported in 2022: 141.6 million

    Delta has grown from a small crop-dusting operation in America’s Deep South to the largest airline in the world by some measures.

    Two important corporate decisions helped consolidate it at the top of the global airline leagues – the purchase of Pan Am’s East Coast and European routes in the early ’90s and its merger with Northwest Airlines in 2008.

    Delta is one of the world’s largest airlines in terms of scheduled passengers.

    Air Serbia serves more than 70 destinations across Europe, the Mediterranean and Middle East.

    Year of foundation: 1927

    Passengers transported in 2022: 2.7 million

    Air Serbia claims descent from the several airlines that operated as flag carriers of Yugoslavia (hence its code JU), starting with Aeroput in 1927 and Jat Airways from 1948.

    During the Cold War years, Jat developed a significant route network and bought equipment from both East and West, in line with Yugoslavia’s status as a non-aligned country.

    After the breakup of Yugoslavia, Jat became the Serbian flag carrier.

    In 2013, Etihad bought a 49% equity stake in the company, which then engaged in a massive recapitalization and rebranding operation that saw it adopt the new name of Air Serbia.

    In July 2023, Iberia joined British Airways and Qatar Airways' joint business partnership.

    Year of foundation: 1927

    First flight: December 1927

    Passengers transported in 2022: No data

    Formerly a privately owned company, Iberia was put under government sponsorship shortly after its launch, providing postal transport between Madrid and Barcelona.

    After an operational hiatus in the early 1930s, it was resurrected with German assistance, by the nationalist side during the Spanish Civil War.

    After the war, Iberia, now firmly in government hands, developed as Spain’s flag carrier.

    In 1946, it was the first airline to fly between Europe and South America, a region that has remained at the core of Iberia’s long haul business throughout its history.

    The airline was privatized in 2001 and it merged with British Airways in 2010 to create the International Airlines Group.

    British Airways is the UK flag carrier.

    Year of foundation: 1919 (or 1974)

    First flight: August 1919 (or 1974)

    Passengers transported in 2018: 44.1 million

    Now this one is a little controversial.

    The UK flag carrier British Airways was formed 45 years ago following the merger of four companies: British Overseas Airways Corporation, British European Airways, Cambrian Airways and Northeast Airlines.

    However, it celebrated ts centenary in 2019 based on the 100 years of achievement of its predecessor airlines.

    It all began, says British Airways, on August 25, 1919, when the world’s first scheduled international flight between London and Paris took off with one passenger, plus some Devonshire cream and some grouse.

    It was the beginning, not just of British Airways, but of international commercial aviation.

    [ad_2]

    Source link

  • As the market enters correction territory, don’t blame the American consumer

    As the market enters correction territory, don’t blame the American consumer

    [ad_1]

    An Amazon.com Inc worker prepares an order in which the buyer asked for an item to be gift wrapped at a fulfillment center in Shakopee, Minnesota, U.S., November 12, 2020.

    Amazon.com Inc | Reuters

    The initial third-quarter report on gross domestic product showed consumer spending zooming higher by 4% percent a year, after inflation, the best in almost two years. September’s retail sales report showed spending climbing almost twice as fast as the average for the last year. And yet, bears like hedge-fund trader Bill Ackman argue that a recession is coming as soon as this quarter and the market has entered correction territory.

    For an economy that rises or falls on the state of the consumer, third-quarter earnings data supports a view of spending that remains mostly good. S&P 500 consumer-discretionary companies that have reported through Oct. 25 saw an average profit gain of 15%, according to CFRA — the biggest revenue gain of the stock market’s 11 sectors.

    “People are kind of scratching their heads and saying, ‘The consumer is holding up better than expected,’” said CFRA Research strategist Sam Stovall said. “Consumers are employed. They continue to buy goods as well as pursue experiences. And they don’t seem worried about debt levels.” 

    How is this possible with interest rates on everything from credit cards to cars and homes soaring?

    It’s the anecdotes from bellwether companies across key industries that tell the real story: Delta Air Lines and United Airlines sharing how their most expensive seats are selling fastest. Homeowners using high-interest-rate-fighting mortgage buydowns. Amazon saying it’s hiring 250,000 seasonal workers. A Thursday report from Deckers Outdoor blew some minds — in what has been a tepid clothing sales environment — by disclosing that embedded in a 79% profit gain that sent shares up 19% was sales of Uggs, a mature line anchored by fuzzy boots, rising 28%.

    The picture they paint largely matches the economic data — generally positive, but with some warts. Here is some of the key evidence from from the biggest company earnings reports across the market that help explain how companies and the American consumer are making the best of a tough rate environment.

    How homebuilders are solving for mortgages rates

    No industry is more central to the market’s notion that the consumer is falling from the sky than housing, because the number of existing home sales have dropped almost 40% from Covid-era peaks. But while Coldwell Banker owner Anywhere Real Estate saw profit fall by half, news from builders of new homes has been pretty good.

    Most consumers have mortgages below 5%, but for new homebuyers, one reason that rates are not biting quite as sharply as they should is that builders have figured out ways around the 8% interest rates that are bedeviling existing home sellers. That helps explains why new home sales are up this year. Homebuilders are dipping into money that previously paid for other incentives to pay for offering mortgages at 5.75% rather than the 8% level other mortgages have hit. At PulteGroup, the nation’s third-biggest builder, that helped drive an 8% third-quarter profit jump and 43% climb in new home orders for delivery later, much better than the government-reported 4.5% gain in new home sales year-to-date.

    “What we’ve done is simply redistribute incentives we’ve historically offered toward cabinets and countertops, and redirected those to interest rate incentives,” PulteGroup CEO Ryan Marshall said. “And that has been the most powerful thing.”

    The mechanics are complex, but work out to this: Pulte sets aside about $35,000 for incentives to get each home to sell, or about 6% of its price, the company said on its earnings conference call. Part of that is paying for a mortgage buydown. About 80% to 85% of buyers are taking advantage of the buydown offer. But many are splitting the funds, mixing a smaller rate buydown and keeping some goodies for the house, the company said.

    Wells Fargo economist Jackie Benson said in a report that builders may struggle to keep this strategy going if mortgage rates stay near 8%, but new-home prices have dropped 12% in the last year. In her view, incentives plus bigger price cuts than most existing homes’ owners will offer is giving builders an edge. 

    At auto companies, price cuts are in, and more are coming

    Car sales picked up notably in September, rising 24% year-over-year, more than twice the year-to-date gain in unit sales. But they were below expectations at electric-vehicle leader Tesla, which blamed high interest rates, and at Ford

    “I just can’t emphasize this enough, that for the vast majority of people buying a car it’s about the monthly payment,” Tesla CEO Elon Musk said on its earnings call. “And as interest rates rise, the proportion of that monthly payment that is interest increases.” 

    Maybe, but that’s not what’s happening at General Motors, even if investor reaction to good numbers at GM was muted because of the strike by the United Auto Workers union. 

    GM tops Q3 expectations but pulls full-year guidance due to mounting UAW strike costs

    GM beat earnings expectations by 40 cents a share, but shares fell 3% because of investor worries about the strike, which forced GM to withdraw its fourth-quarter earnings forecast on Oct. 24. Ford, which settled with the UAW on Oct. 25, said the next day it had a “mixed” quarter, as profit missed Wall Street targets due to the strike. Consumers came through, as unit sales rose 7.7% for the quarter, with truck and EV sales both up 15%. GM CEO Mary Barra said on GM’s analyst call that the company gained market share, posting a 21% gain in unit sales despite offering incentives below the industry average.

    “While we hear reports out there in the macro that consumer sentiment might be weakening, etc., we haven’t seen that in demand for our vehicles,” GM CFO Paul Jacobson told analysts. But Ford CFO John Lawler said car prices need to decline by about $1,800 to be as affordable as they were before Covid. “We think it’s going to happen over 12 to 18 months,” he said. 

    Tesla’s turnaround plan turns on continuing to lower its cost of producing cars, which came down by about $2,000 per vehicle in last year, the company said. Along with federal tax credits for electric vehicles, a Model Y crossover can be had for about $36,490, or as little as $31,500 in states with local tax incentives for EVs. That’s way below the average for all cars, which Cox Automotive puts at more than $50,000. But Musk says some consumers still aren’t convincible. .

    “When you look at the price reductions we’ve made in, say, the Model Y, and you compare that to how much people’s monthly payment has risen due to interest rates, the price of the Model Y is almost unchanged,” Musk said. “They can’t afford it.”

    Most banks say the consumer still has cash, but not Discover

    To know how consumers are doing, ask the banks, which disclose consumer balances quarterly. To know if they’re confident, ask the credit card companies (often the same companies) how much they are spending. 

    In most cases, financial services firms say consumers are doing well.

    At Bank of America, consumer balances are still about one-third higher than before Covid, CEO Brian Moynihan said on the company’s conference call. At JPMorgan Chase, balances have eroded 3% in the last year, but consumer loan delinquencies declined during the quarter, the company said.

    “Where am I seeing softness in [consumer] credit?” said chief financial officer Jeremy Barnum, repeating an analyst’s question on the earnings call. “I think the answer to that is actually nowhere.”

    Among credit card companies, the “resilient” is still the main story. MasterCard, in fact, used that word or “resilience” eight times to describe U.S. consumers in its Oct. 26 call.

    “I mean, the reality is, unemployment levels are [near] all-time record lows,” MasterCard chief financial officer Sachin Mehra said.

    At American Express, which saw U.S. consumer spending rise 9%, the mild surprise was the company’s disclosure that young consumers are adding Amex cards faster than any other group. Millennials and Gen Zers saw their U.S. spending via Amex rise 18%, the company said.

    “Guess they’re not bothered by the resumption of student loan payments,” Stovall said.

    Consumer data is more positive than sentiment, says Bankrate's Ted Rossman

    The major fly in the ointment came from Discover Financial Services, one of the few banks to make big additions to its loan loss reserves for consumer debt, driving a 33% drop in profit as Discover’s loan chargeoffs doubled.  

    Despite the fact that U.S. household debt burdens are almost exactly the same as in late 2019, and declined during the quarter, according to government data, Discover chief financial officer John Greene said on its call, “Our macro assumptions reflect a relatively strong labor market but also consumer headwinds from a declining savings rate and increasing debt burdens.”

    At airlines, still no sign of a travel recession

    It’s good to be Delta Air Lines right now, sitting on a 59% third-quarter profit gain driven by the most expensive products on their virtual shelves: First-class seats and international vacations. Also good to be United, where higher-margin international travel rose almost 25% and the company is planning to add seven first-class seats per departure by 2027. Not so good to be discounter Spirit, which saw shares fall after reporting a $157 million loss.

    “With the market continuing to seemingly will a travel recession into existence despite evidence to the contrary from daily [government] data and our consumer surveys, Delta’s third-quarter beat and solid fourth-quarter guide and commentary should finally put the group at ease about a consumer “cliff,” allow them to unfasten their seatbelts and walk about the cabin,” Morgan Stanley analyst Ravi Shanker said in a note to clients.

    One tangible impact: United is adding 20 planes this quarter, though it is pushing 12 more deliveries into 2024, while Spirit said it’s delaying plane deliveries, and focusing on its proposed merger with JetBlue and cost-cutting to regain competitiveness as soft demand for its product persists into the holiday season.

    As has been the case throughout much of 2023, richer consumers — who contribute the greater share of spending — are doing better than moderate-income families, Sundaram said.

    The goods recession is for real

    Whirlpool, Ethan Allen and mattress maker Sleep Number all saw their stocks tumble after reporting bad earnings, all of them experiencing sales struggles consistent with the macro data.

    This follows a trend now well-entrenched in the economy: people stocked up on hard goods, especially for the house, during the pandemic, when they were stuck at home more. All three companies saw shares surge during Covid, and growth has slacked off since as they found their markets at least partly saturated and consumers moved spending to travel and other services.

    “All of the stimulus money went to the furniture industry,” Sundaram said, exaggerating for effect. “Now they’ve been falling apart for the last year.”

    Ethan Allen sales dropped 24%, as the company said a flood in a Vermont factory and softer demand were among the causes. At Whirlpool, which said in second-quarter earnings that it was moving to make up slowing sales to consumers by selling more appliances to home builders, “discretionary purchases have been even softer than anticipated, as a result of increased mortgage rates and low consumer confidence,” CEO Marc Bitzer said during Thursday’s earnings call. Its shares fell more than 20%. 

    Amazon’s $1.3 billion holiday hiring spree

    Amazon is making its biggest-ever commitment to holiday hiring, spending $1.3 billion to add the workers, mostly in fulfillment centers. 

    That’s possible because Amazon has reorganized its warehouse network to speed up deliveries and lower costs, sparking 11% sales gains the last two quarters as consumers turn to the online giant for more everyday repeat purchases. Amazon also tends to serve a more affluent consumer who is proving more resilient in the face of interest rate hikes and inflation than audiences for Target or dollar stores, according to CFRA retailing analyst Arun Sundaram said.

    “Their retail sales are performing really well,” Sundaram said. “There’s still headwinds affecting discretionary sales, but everyday essentials are doing really well.

    All of this sets the stage for a high-stakes holiday season.

    PNC still thinks there will be a recession in early 2024, thanks partly to the Federal Reserve’ rate hikes, and thinks investors will focus on sales of goods looking for more signs of weakness. “There’s a lot of strength for the late innings” of an expansion, said PNC Asset Management chief investment officer Amanda Agati.

    Sundaram, whose firm has predicted that interest rates will soon drop as inflation wanes, thinks retailers are in better shape, with stronger supply chains that will allow strategic discounting more than last year to pump sales. The Uggs sales outperformance was attributed to improved supply chains and shorter shipping times as the lingering effects of the pandemic recede.

    “Though there are headwinds for the consumer, there’s a chance for a decent holiday season,” he said, albeit one hampered still by the inflation of the last two years. “The 2022 holiday season may have been the low point.” 

    Deloitte predicts soft holiday sales

    [ad_2]

    Source link

  • The Israel-Hamas war is affecting the financial outlooks of these large companies

    The Israel-Hamas war is affecting the financial outlooks of these large companies

    [ad_1]

    The ‘Rhapsody of the Seas’ cruise liner carrying US citizens leaves the Israeli port of Haifa to be evacuated to the Mediterranean island of Cyprus on October 16, 2023, amid the ongoing battles between Israel and the Palestinian Islamist group Hamas. 

    Aris Messinis | AFP | Getty Images

    Some of the world’s most well-known companies are already seeing the Israel-Hamas war weighing on operations.

    On Oct. 7, militant group Hamas struck Israeli towns in a surprise attack and took more than 200 hostages. More than 7,000 people have been killed in Gaza, per Palestinian health officials, while the Israeli Defense Forces said more than 1,400 have been killed in the country.

    Corporations that do business or have operations in the region have already begun seeing the war change their financial outlooks as the unrest weighs on everything from advertising dollars to tourism to supply chains. These early admissions come as world leaders grow increasingly concerned that the conflict will further intensify, with international calls for a cease-fire being rejected.

    United Airlines said fourth-quarter performance could vary depending on the length of flight suspensions in Tel Aviv. Its updated range for adjusted earnings per share came in below analysts’ forecasts.

    “We have unmatched geographic diversity with a large domestic network complemented by the largest long-haul international network and both are solidly profitable,” CEO Scott Kirby said earlier this month. “While this is a great attribute, it does create some short-term risk and volatility as we’re seeing right now with the transitory hit to margins this quarter as a result of the tragedy in Israel.”

    Travel changes

    United is one of several carriers including Delta Air Lines and American Airlines that have rushed to change schedules as the conflict has unfolded. Notably, El Al, the Israeli flag carrier, said it would fly on the Jewish Sabbath for the first time in more than four decades to help bring reservists abroad back to the country.

    Across the travel industry, the war is on the mind of corporate leaders. Plane-maker Boeing said in a regulatory filling that the conflict could potentially affect certain suppliers, in addition to airlines.

    About 1.5% of Royal Caribbean capacity in the fourth quarter had planned to visit Israel, CEO Jason Liberty said on the cruise line’s call on Thursday. A few of the adjusted sailings that were previously expected have home ports in Haifa, a city in the northern region of the country.

    The company also offered free use of its Rhapsody of the Seas vessel to the U.S. government to aid in the evacuation of Americans from Israel. Between the changed itineraries and use of the ship, the company estimated it would have an impact of 5 cents per share on its earnings. The company expects to see between $6.58 and $6.63 in adjusted earnings per share for the year.

    El Al Airlines airplane flying on February 2023.

    Nurphoto | Nurphoto | Getty Images

    “I would … like to recognize the incredible effort from our shoreside teams and crew on board Rhapsody of the Seas who have been working tirelessly with the U.S. Department of State to help safely evacuate Americans from Israel,” Liberty said. “My heartfelt gratitude goes out to all involved.”

    Still, Liberty said the cruise line’s customer base is sticky, so it may become more of a question of where they are going to travel rather than if they are going to cancel their plans.

    “They’re going to go somewhere with us,” he said. “That’s what we’re focused on making sure they’re doing.”

    ‘Unpredictable nature’

    Technology companies were among those seeing the conflict affect the workforce, advertising spending and supply chains.

    Snap said in its latest earnings release that it saw pauses in spending from a “large number of primarily brand-oriented advertising campaigns” immediately after the war began. That has weighed on revenue quarter to date.

    While the company said some of the campaigns that initially paused have now resumed, the company has also seen others that didn’t originally stop advertising now pause. Snap said it would be “imprudent” to offer formal guidance on what to expect for the current quarter “due to the unpredictable nature of war.”

    Meta finance chief Susan Li said the Facebook and Instagram parent has seen softer advertising spending so far in the quarter, correlating in timeline with the start of the conflict. Li noted that it isn’t necessarily due to any one event, but cooler spending has aligned in the past with the start of conflicts such as the Russian invasion of Ukraine last year.

    “This is something that we’re continuing to monitor,” Li told analysts during the company’s earnings call on Wednesday. “We’ve reflected the latest trends and advertiser reaction that we’ve seen into our Q4 outlook — which, again, we think reflects the greater uncertainty and volatility in the landscape ahead.”

    Align Technology is expecting increased headwinds from the uncertainty and potential supply chain issues tied to the conflict, according to Chief Financial Officer John Morici. He said the fourth-quarter operating margin, when adjusted for generally accepted accounting principles, should be down from the prior quarter as the company offers severance to adjust to headcount changes in this situation.

    Multiple corporations including Aon and West Pharmaceutical noted a continued focus on supporting employees and their family members who live and work in the region. Israel is known in part for its vibrant startup and technology scene, with entrepreneurs now wondering how to push forward in the new normal, especially as citizens get called to serve in reserve units.

    ServiceNow CEO William McDermott said during the company’s call with analysts on Wednesday that employee Shlomi Sividia was among those murdered at the Supernova Music Festival. He said Sividia was “highly respected, admired and a good friend to many.”

    “We stand in solidarity with our team and with their families. Terrorism has caused the unfathomable humanitarian crisis that now engulfs millions of people in Israel and Gaza,” McDermott said. “Our hearts pray for the innocent on all sides. Even with optimism in short supply, we choose to honor the dream of a peaceful and prosperous future for the Middle East region.”

    Companies specializing in defense have also been on alert as another international conflict breaks out.

    General Dynamics, the biggest U.S. artillery shell producer, had already been ramping up artillery production to meet needs amid the war in Ukraine, according to finance chief Jason Aiken. Now, the company is working to increase production to as high as 100,000 units per month, up from 14,000.

    “I think the Israel situation is only going to put upward pressure on that demand,” Aiken said during General Dynamics’ Wednesday earnings call.

    — CNBC’s Robert Hum, Morgan Brennan and Leslie Josephs contributed reporting.

    [ad_2]

    Source link

  • Major airlines suspend Israel flights after attacks

    Major airlines suspend Israel flights after attacks

    [ad_1]

    Passengers look at a departure board at Ben Gurion Airport near Tel Aviv, Israel, on October 7, 2023, as flights are canceled because of the Hamas surprise attacks. 

    Gil Cohen-magen | AFP | Getty Images

    Several airlines suspended service to Israel this weekend after surprise attacks by Hamas and Israeli retaliation left hundreds dead.

    United Airlines, Delta Air Lines and American Airlines each scrubbed service to Tel Aviv. United Flight 954, which departed San Francisco Friday night for Israel, turned back near Greenland, according to flight-tracker FlightAware.

    Lufthansa Group said all of its flights, including those on Swiss International Air Lines and Austrian Airlines, were suspended into Tel Aviv through Monday.

    “We are continuously monitoring the security situation in Israel and are in close contact with the authorities,” Lufthansa said in a statement. “The safety of our guests and crew members has top priority for Lufthansa.”

    Israeli airline El Al said Sunday that its flights are “operated as scheduled.”

    El Al and other carriers also offered travel waivers for customers to delay or cancel their trips.

     

    [ad_2]

    Source link

  • These 20 stocks in the S&P 500 are expected to soar after rising interest rates have pushed down valuations

    These 20 stocks in the S&P 500 are expected to soar after rising interest rates have pushed down valuations

    [ad_1]

    Two things investors can be sure about: Nothing lasts forever and the stock market always overreacts. The spiking of yields on long-term U.S. Treasury securities has been breathtaking, and it has led to remarkable declines for some sectors and possible bargains for contrarian investors who can commit for the long term.

    First we will show how the sectors of the S&P 500

    have performed. Then we will look at price-to-earnings valuations for the sectors and compare them to long-term averages. Then we will screen the entire index for companies trading below their long-term forward P/E valuation averages and narrow the list to companies most favored by analysts.

    Here are total returns, with dividends reinvested, for the 11 sectors of the S&P 500, with broad indexes below. The sectors are sorted by ascending total returns this year through Monday.

    Sector or index

    2023 return

    2022 return

    Return since end of 2021

    1 week return

    1 month return

    Utilities

    -18.4%

    1.6%

    -17.2%

    -11.1%

    -9.6%

    Real Estate

    -7.1%

    -26.1%

    -31.4%

    -3.0%

    -8.8%

    Consumer Staples

    -5.4%

    -0.6%

    -6.0%

    -2.2%

    -4.4%

    Healthcare

    -4.2%

    -2.0%

    -6.1%

    -1.7%

    -3.3%

    Financials

    -2.5%

    -10.5%

    -12.7%

    -2.5%

    -4.7%

    Materials

    1.3%

    -12.3%

    -11.2%

    -1.9%

    -7.0%

    Industrials

    3.5%

    -5.5%

    -2.1%

    -1.8%

    -7.3%

    Energy

    4.0%

    65.7%

    72.4%

    -1.9%

    -1.4%

    Consumer Discretionary

    27.0%

    -37.0%

    -20.0%

    -0.6%

    -5.2%

    Information Technology

    36.5%

    -28.2%

    -2.0%

    0.8%

    -5.9%

    Communication Services

    42.5%

    -39.9%

    -14.3%

    1.1%

    -1.3%

    S&P 500
    13.1%

    -18.1%

    -7.4%

    -1.1%

    -4.9%

    DJ Industrial Average
    2.5%

    -6.9%

    -4.5%

    -1.7%

    -4.0%

    Nasdaq Composite Index
    COMP
    28.0%

    -32.5%

    -13.7%

    0.3%

    -5.1%

    Nasdaq-100 Index
    36.5%

    -32.4%

    -7.7%

    0.5%

    -4.2%

    Source: FactSet

    Returns for 2022 are also included, along with those since the end of 2021. Last year’s weakest sector, communications services, has been this year’s strongest performer. This sector includes Alphabet Inc.
    GOOGL
    and Meta Platforms Inc.
    META,
    which have returned 52% and 155% this year, respectively, but are still down since the end of 2021. To the right are returns for the past week and month through Monday.

    On Monday, the S&P 500 Utilities sector had its worst one-day performance since 2020, with a 4.7% decline. Investors were reacting to the jump in long-term interest rates.

    Here is a link to the U.S. Treasury Department’s summary of the daily yield curve across maturities for Treasury securities.

    The yield on 10-year U.S. Treasury notes

    jumped 10 basis points in only one day to 4.69% on Monday. A month earlier the 10-year yield was only 4.27%. Also on Monday, the yield on 20-year Treasury bonds

    rose to 5.00% from 4.92% on Friday. It was up from 4.56% a month earlier.

    Market Extra: Bond investors feel the heat as popular fixed-income ETF suffers lowest close since 2007

    The Treasury yield curve is still inverted, with 3-month T-bills

    yielding 5.62% on Monday, but that was up only slightly from a month earlier. An inverted yield curve has traditionally signaled that bond investors expect a recession within a year and a lowering of interest rates by the Federal Reserve. Demand for bonds pushes their prices down. But the reverse has happened over recent days, with the selling of longer-term Treasury securities pushing yields up rapidly.

    Another way to illustrate the phenomenon is to look at how the Federal Reserve has shifted the U.S. money supply. Odeon Capital analyst Dick Bove wrote in a note to clients on Friday that “the Federal Reserve has not deviated from its policy to defeat inflation by tightening monetary policy,” as it has shrunk its balance sheet (mostly Treasury securities) to $8.1 trillion from $9 trillion in March 2022. He added: “The M2 money supply was $21.8 trillion in March 2022; today it is $20.8 trillion. You cannot get tighter than these numbers indicate.”

    Then on Tuesday, Bove illustrated the Fed’s tightening and the movement of the 10-year yield with two charts:


    Odeon Capital Group, Bloomberg

    Bove said he believes the bond market has gotten it wrong, with the inverted yield curve reflecting expectations of rate cuts next year. If he is correct, investors can expect longer-term yields to keep shooting up and a normalization of the yield curve.

    This has set up a brutal environment for utility stocks, which are typically desired by investors who are seeking dividend income. In a market in which you can receive a yield of 5.5% with little risk over the short term, and in which you can lock in a long-term yield of about 5%, why take a risk in the stock market? And if you believe that the core inflation rate of 3.7% makes a 5% yield seem paltry, keep in mind that not all investors think the same way. Many worry less about the inflation rate because large components of official inflation calculations, such as home prices and car prices, don’t affect everyone every year.

    We cannot know when this current selloff of longer-term bonds will end, or how much of an effect it will have on the stock market. But sharp declines in the stock market can set up attractive price points for investors looking to go in for the long haul.

    Screening for lower valuations and high ratings

    A combination of rising earnings estimates and price declines could shed light on potential buying opportunities, based on forward price-to-earnings ratios.

    Let’s look at the sectors again, in the same order, this time to show their forward P/E ratios, based on weighted rolling 12-month consensus estimates for earnings per share among analysts polled by FactSet:

    Sector or index

    Current P/E to 5-year average

    Current P/E to 10-year average

    Current P/E to 15-year average

    Forward P/E

    5-year average P/E

    10-year average P/E

    15-year average P/E

    Utilities

    82%

    86%

    95%

    14.99

    18.30

    17.40

    15.82

    Real Estate

    76%

    80%

    81%

    15.19

    19.86

    18.89

    18.72

    Consumer Staples

    93%

    96%

    105%

    18.61

    19.92

    19.30

    17.64

    Healthcare

    103%

    104%

    115%

    16.99

    16.46

    16.34

    14.72

    Financials

    88%

    92%

    97%

    12.90

    14.65

    14.08

    13.26

    Materials

    100%

    103%

    111%

    16.91

    16.98

    16.42

    15.27

    Industrials

    88%

    96%

    105%

    17.38

    19.84

    18.16

    16.56

    Energy

    106%

    63%

    73%

    11.78

    11.17

    18.80

    16.23

    Consumer Discretionary

    79%

    95%

    109%

    24.09

    30.41

    25.39

    22.10

    Information Technology

    109%

    130%

    146%

    24.20

    22.17

    18.55

    16.54

    Communication Services

    86%

    86%

    94%

    16.41

    19.09

    19.00

    17.43

    S&P 500
    94%

    101%

    112%

    17.94

    19.01

    17.76

    16.04

    DJ Industrial Average
    93%

    98%

    107%

    16.25

    17.49

    16.54

    15.17

    Nasdaq Composite Index
    92%

    102%

    102%

    24.62

    26.71

    24.18

    24.18

    Nasdaq-100 Index
    97%

    110%

    126%

    24.40

    25.23

    22.14

    19.43

    There is a limit to how many columns we can show in the table. The S&P 500’s forward P/E ratio is now 17.94, compared with 16.79 at the end of 2022 and 21.53 at the end of 2021. The benchmark index’s P/E is above its 10- and 15-year average levels but below the five-year average.

    If we compare the current sector P/E numbers to 5-, 10- and 15-year averages, we can see that the current levels are below all three averages for four sectors: utilities, real estate, financials and communications services. The first three face obvious difficulties as they adjust to the rising-rate environment, while the real-estate sector reels from continuing low usage rates for office buildings, from the change in behavior brought about by the COVID-19 pandemic.

    Your own opinions, along with the pricing for some sectors, might drive some investment choices.

    A broader screen of the S&P 500 might point to companies for you to research further.

    We narrowed the S&P 500 as follows:

    • Current forward P/E below 5-, 10- and 15-year average valuations. For stocks with negative earnings-per-share estimates for the next 12 months, there is no forward P/E ratio so they were excluded. For stocks listed for less than 15 years, we required at least a 5-year average P/E for comparison. This brought the list down to 138 companies.

    • “Buy” or equivalent ratings from at least two-thirds of analysts: 41 companies.

    Here are the 20 companies that passed the screen, for which analysts’ price targets imply the highest upside potential over the next 12 months.

    There is too much data for one table, so first we will show the P/E information:

    Company

    Ticker

    Current P/E to 5-year average

    Current P/E to 10-year average

    Current P/E to 15-year average

    SolarEdge Technologies Inc.

    SEDG 89%

    N/A

    N/A

    AES Corp.

    AES 66%

    75%

    90%

    Insulet Corp.

    PODD 18%

    N/A

    N/A

    United Airlines Holdings Inc.

    UAL 42%

    50%

    N/A

    Alaska Air Group Inc.

    ALK 51%

    57%

    N/A

    Tapestry Inc.

    TPR 39%

    49%

    70%

    Albemarle Corp.

    ALB 39%

    50%

    73%

    Delta Air Lines Inc.

    DAL 60%

    63%

    21%

    Alexandria Real Estate Equities Inc.

    ARE 59%

    68%

    N/A

    Las Vegas Sands Corp.

    LVS 96%

    78%

    53%

    Paycom Software Inc.

    PAYC 61%

    N/A

    N/A

    PayPal Holdings Inc.

    PYPL 33%

    N/A

    N/A

    SBA Communications Corp. Class A

    SBAC 27%

    N/A

    N/A

    Advanced Micro Devices Inc.

    AMD 58%

    39%

    N/A

    LKQ Corp.

    LKQ 92%

    44%

    78%

    Charles Schwab Corp.

    SCHW 75%

    54%

    73%

    PulteGroup Inc.

    PHM 94%

    47%

    N/A

    Lamb Weston Holdings Inc.

    LW 71%

    N/A

    N/A

    News Corp Class A

    NWSA 93%

    73%

    N/A

    CVS Health Corp.

    CVS 75%

    61%

    67%

    Source: FactSet

    Click on the tickers for more about each company or index.

    Click here for Tomi Kilgore’s detailed guide to the wealth of information available for free on the MarketWatch quote page.

    News Corp
    NWSA
    is on the list. The company owns Dow Jones, which in turn owns MarketWatch.

    Here’s the list again, with ratings and consensus price-target information:

    Company

    Ticker

    Share “buy” ratings

    Oct. 2 price

    Consensus price target

    Implied 12-month upside potential

    SolarEdge Technologies Inc.

    SEDG 74%

    $122.56

    $268.77

    119%

    AES Corp.

    AES 79%

    $14.16

    $25.60

    81%

    Insulet Corp.

    PODD 68%

    $165.04

    $279.00

    69%

    United Airlines Holdings Inc.

    UAL 71%

    $41.62

    $69.52

    67%

    Alaska Air Group Inc.

    ALK 87%

    $36.83

    $61.31

    66%

    Tapestry Inc.

    TPR 75%

    $28.58

    $46.21

    62%

    Albemarle Corp.

    ALB 81%

    $162.41

    $259.95

    60%

    Delta Air Lines Inc.

    DAL 95%

    $36.45

    $58.11

    59%

    Alexandria Real Estate Equities Inc.

    ARE 100%

    $98.18

    $149.45

    52%

    Las Vegas Sands Corp.

    LVS 72%

    $45.70

    $68.15

    49%

    Paycom Software Inc.

    PAYC 77%

    $260.04

    $384.89

    48%

    PayPal Holdings Inc.

    PYPL 69%

    $58.56

    $86.38

    48%

    SBA Communications Corp. Class A

    SBAC 68%

    $198.24

    $276.69

    40%

    Advanced Micro Devices Inc.

    AMD 74%

    $103.27

    $143.07

    39%

    LKQ Corp.

    LKQ 82%

    $49.13

    $67.13

    37%

    Charles Schwab Corp.

    SCHW 77%

    $53.55

    $72.67

    36%

    PulteGroup Inc.

    PHM 81%

    $73.22

    $98.60

    35%

    Lamb Weston Holdings Inc.

    LW 100%

    $92.23

    $123.50

    34%

    News Corp Class A

    NWSA 78%

    $20.00

    $26.42

    32%

    CVS Health Corp.

    CVS 77%

    $69.69

    $90.88

    30%

    Source: FactSet

    A year may actually be a short period for a long-term investor, but 12-month price targets are the norm for analysts working for brokerage companies.

    Don’t miss: This fund shows that industry expertise can help you make a lot of money in the stock market

    [ad_2]

    Source link

  • Delta CEO says carrier went ‘too far’ in SkyMiles changes, promises modifications after frequent flyer backlash

    Delta CEO says carrier went ‘too far’ in SkyMiles changes, promises modifications after frequent flyer backlash

    [ad_1]

    Delta Air Lines Boeing 717-200 airplane as seen on the final approach landing at New York JFK John F. Kennedy International Airport, NYC, USA.

    NurPhoto / Contributor

    Delta Air Lines CEO Ed Bastian said the airline will make “modifications” in the next few weeks to its loyalty program after a recently announced overhaul that would make it more expensive for many travelers to earn elite status and get into airport lounges was met with a backlash from customers.

    “No question we probably went too far,” Bastian said at the Rotary Club of Atlanta on Monday.

    The program changes, which Delta unveiled earlier this month, would reward customers with elite status based on how much they spent, a model similar to that of American Airlines, and reduce access to Delta popular airport Sky Club lounges for many American Express cardholders.

    JetBlue Airways tried to capitalize on some customers’ anger over Delta’s changes by offering frequent flyer status matching, saying, “we’ve made it easy for you to cozy up to a new loyalty program and see where it goes.”

    Delta has been grappling with a surge in elite travelers, bolstered by Covid pandemic and post-pandemic spending, and swarms of travelers trying to get into its lounges, leading to long lines for many customers. The airline and rivals including American and United have been racing to build bigger airport lounges to cater to swelling numbers of big spenders.

    Bastian said the airline will announce the updated program changes in the coming weeks. A Delta spokesman declined to comment further on the changes.

    “It’s gotten to the point, honestly, where we have so much demand for our premium product and services that are far in excess of our ability to serve it effectively in terms of our assets,” Bastian said.

    He said that over Covid, the airline has doubled the number of Diamond Medallion status members.

    David Neeleman, CEO of Breeze Airways and founder of JetBlue, told CNBC on Wednesday that he has Delta Medallion status and that he tries to use Delta’s airport lounges but that sometimes “there’s a big line and it’s not worth it.”

    Delta last year announced several changes to crack down on overcrowding at the clubs, such as barring employees from using them when flying standby with company travel privileges, even if they had qualifying credit cards. The Atlanta-based carrier also raised prices for club memberships for regular customers.

    [ad_2]

    Source link

  • More companies, especially airlines, warn higher costs will eat into profits

    More companies, especially airlines, warn higher costs will eat into profits

    [ad_1]

    An American Airlines 787 is loaded with cargo at Philadelphia International Airport.

    Leslie Josephs/CNBC

    More companies are warning that a surge in the cost of fuel and employee pay hikes will eat into profits this quarter.

    Companies from aerospace manufacturers to package delivery giant UPS are digesting big new labor deals. Meanwhile, unions from the auto industry to Hollywood are pushing for better compensation. Airlines, whose biggest expenses are jet fuel and labor, are getting hit particularly hard.

    Delta Air Lines on Thursday cut its adjusted earnings forecast for the third quarter to between $1.85 and $2.05 a share, down from an earlier forecast of $2.20 to $2.50. Delta said it is paying more for fuel than it expected but said maintenance costs were also more than it anticipated.

    U.S. jet fuel at major airports averaged $3.42 a gallon as of Tuesday, up 38% from two months ago, according to Airlines for America, an industry group.

    On Wednesday, American Airlines trimmed its earnings forecast, following revisions at Alaska Airlines and Southwest Airlines. American expects to adjusted earnings per share of between 20 cents and 30 cents in the third quarter, down from a previous forecast of as much as 95 cents a share, citing more expensive fuel and a new pilot labor deal.

    The company expects to recognize a $230 million expense for that new contract, which includes immediate 21% raises for pilots, and compensation increasing more than 46% over the duration of the four-year contract, including 401(k) contributions.

    Elsewhere, labor unions from Detroit to Hollywood have pushed hard for raises, better benefits and schedules in new contracts. UPS and the Teamsters union representing about 340,000 workers at the package carrier in July reached a new labor deal that includes raises for both full- and part-time workers, and narrowly avoided a potential strike.

    UPS workers ratified the agreement ratified last month. By the end of the five-year contract, a driver could make $170,000 in pay and benefits, the company said.

    Earlier this week, the delivery giant outlined the costs associated with the deal and said it the expenses from it will increase at 3.3% compound annual growth rate over the next five years.

    “Year one costs more than we originally forecast,” said Brian Newman, the company’s CFO, said on an investor call this week. He said it will cost $500 million more in the back half of 2023 than expected, he said.

    As of midday Thursday, the United Auto Workers and Detroit automakers appeared far apart on labor talks for new labor deals, setting up “likely” strategic strikes at the companies after an 11:59 p.m. ET Thursday deadline, UAW President Shawn Fain said Wednesday night. The union has sought more than 30% hourly pay increases, a reduced 32-hour work week, and other improvements.

    Other unions are also seeking higher compensation. The Hollywood writers and actors strikes began in May and mid-July, respectively, with members demanding better pay to match changing industry dynamics in the entertainment-streaming era.

    American Airlines offered flight attendants 11% pay increases the date a new contract starts, and 2% raises after that. But the Association of Professional Flight Attendants said the union wants 35% increases at the start of a new deal, followed by 6% annual raises.

    Unions have complained that workers didn’t get raises during high inflation in recent years since the Covid pandemic derailed talks.

    Strong travel demand has helped the largest carriers more than cover their higher expenses. But some carriers are seeking cracks in sales just as a slower travel period after summer begins. Spirit Airlines on Wednesday said it expects a deeper loss than previously forecast and lower revenue.

    Frontier Airlines warned Wednesday that “in recent weeks, sales have been trending below historical seasonality patterns,” and forecast an adjusted loss for the quarter.

    – CNBC’s Michael Wayland and Gabriel Cortes contributed to this article.

    [ad_2]

    Source link

  • Delta will make it harder to get into airport lounges, changes rules to earn elite status

    Delta will make it harder to get into airport lounges, changes rules to earn elite status

    [ad_1]

    Delta’s new SkyClub at John F. Kennedy International Airport in New York.

    Leslie Josephs/CNBC

    Delta Air Lines is changing how customers can earn elite frequent flyer status and is making it harder for many American Express cardholders to get into the carrier’s airport lounges, the latest reality check for air travel’s era of mass luxury.

    Starting Jan. 1, customers will earn Delta Medallion status solely based on their spending, instead of a combination of dollars spent with the carrier and flights. The new model is similar to one that American Airlines adopted earlier this year.

    Major airlines have continually raised the requirements to earn status as customer spending at the airline and on co-branded credit cards has surged in recent years, swelling the ranks of these high-paying customers. Elite status can come with a variety of perks, from early boarding to upgrades to first class and lounge access.

    “We want customers to be able to receive status with activity beyond just air travel,” Dwight James, Delta’s senior vice president of customer engagement and loyalty, told CNBC.

    Next year, Delta customers will earn 1 Medallion Qualifying Dollar for every $1 they spend on Delta flights, car rentals, hotels and vacation packages booked through the airline.

    The ratio isn’t 1:1 for dollars spent through co-branded American Express cards. Delta SkyMiles Reserve and Reserve Business American Express card members earn 1 Medallion Qualifying Dollar for every $10 spent on the card, while Delta SkyMiles Platinum and Platinum Business American Express Card Members earn 1 Medallion Qualifying Dollar for every $20 spent.

    Here are the new status requirements:

    • Silver Medallion – 6,000 MQDs
    • Gold Medallion – 12,000 MQDs
    • Platinum Medallion – 18,000 MQDs
    • Diamond Medallion – 35,000 MQDs

    Raising the bar on Sky Club entry

    Delta is limiting access to its popular Sky Club airport lounges through certain American Express credit cards after grappling with overcrowding at some of them, drawing complaints from travelers.

    Instead of the current unlimited visits, starting Feb. 1, 2025, American Express Platinum and Platinum Business cardholders will get six visits a year, unless they spend $75,000 on the card in a calendar year.

    Meanwhile, Delta SkyMiles Reserve and Reserve Business cardholders will get 10 Sky Club visits a year, a limit they can skirt by also spending $75,000 in a year.

    Delta’s SkyMiles Platinum and Platinum Business American Express cards will no longer get club access through the cards itself, although customers can enter by buying a club membership or if they have elite status with Delta that allows them to pick a club membership as a perk.

    “Some of the changes that we’re making ensures that we’re taking care of our most premium customers with our most premium assets, one of those being the Sky Club,” James said. He said the changes were made in conjunction with American Express.

    The airline last year announced several changes to crack down on overcrowding at the clubs, including barring employees from using them when flying standby with company travel privileges, even if they had qualifying credit cards. It also raised prices for club memberships for regular customers.

    Delta and its competitors are racing to build bigger and more modern lounges to accommodate customers. United Airlines, for example, on Wednesday opened a 35,000 square-foot club at its hub at Denver International Airport, the largest in its network, after opening a 24,000 square-foot club at the airport earlier this summer.

    [ad_2]

    Source link