Airlines have been the butt of investing jokes for years, and the pandemic was another reason to doubt the group as many posted giant losses, asserts Mike Cintolo, editor of Cabot Top Ten Trader.

But now the pendulum is fully on the other end of the spectrum, with leading players like United Airlines (UAL) posting out-of-this-world earnings numbers and with management expecting 2023 to be monstrous, causing investor perception for the group to rise.

In Q4, United saw revenue plow ahead 51% from a year ago, thanks mainly to higher pricing; revenue per available seat mile was up a whopping 26% from Q4 of 2019 (pre-pandemic) even as capacity was still down 9% from three years prior, leading to a pre-tax margin of 9% and a huge bottom line that beat estimates by 17% despite lots of weather issues.

But what’s most interesting is what comes next: United’s CEO believes the industry will struggle to boost capacity as much as planned due to staffing issues (he believes pilot staffing has to be 5% to 10% above prepandmic levels due to higher sick days and other factors), which should again keep pricing high as demand remains robust.

United’s investments in recent years should pay off, with the company looking for a high-teens boost in available seat miles and revenue, which, combined with lower fuel prices, could see the bottom line leap above $10 per share.

Wall Street isn’t as bullish, but still sees earnings tripling to above $7 per share this year and leaping further in 2024. Nobody’s saying airline stocks are suddenly buy-and-hold names for the next few years, but the outlook for the next few quarters looks fantastic.

Technically, the shares have been floundering for a long time at this point. But like many of its peers, there’s been a distinct change in character, with the stock not only advancing but blasting up to its highs from last spring on giant volume.

Yes, UAL did pull in after earnings, and we think a bit more of a rest could be in order — but at this point the retreat looks more like a shakeout than any major problem. We’re OK starting a position here or (preferably) on dips.

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