Take a moment to pity airlines: Even on their best day, the most they can typically hope for is meeting customer expectations, not exceeding them.
To wit, Citi expects nearly every major airline to deliver beat-and-raise second quarters, but that might not do much to help the stocks as a whole. Yet they're still worth a look -- and the bigger the better, with one exception.
Delta Air Lines will kick off second-quarter earnings season for major airlines on July 10, and things have been looking up for the group, between falling jet fuel prices and resilient demand. Capacity growth has remained relatively modest, meaning recent higher airfares seem likely to stick, at least near-term, rather than devolving into a pricing war.
That leads Citi analyst John Godyn to expect airlines almost across the board will deliver second-quarter results ahead of analyst estimates, a pattern that could repeat in the third quarter, too.
Don't expect fireworks, however. The shares have already rallied, meaning a lot of the good news is already priced in, and not all stocks will be able to sustain those gains. The U.S. Global Jets exchange-traded fund is up more than 17% in the past month alone, and its 18% gains in 2026 are easily above those of the S&P 500 and the Nasdaq Composite.
"Gone are the days where the airlines that are growing fastest get a premium multiple, in our view," Godyn writes. "Instead, investors are likely to reward the companies whose earnings proved to be most resilient during the shock -- in other words, the supermajors (Delta, United Airlines, and American Airlines)."
By contrast, Godyn writes airlines that are planning to ramp up domestic capacity growth toward the end of the year are likely to see their stocks punished, even as earnings move higher.
Godyn writes we're in a "Supermajors Super-Cycle," when the Big Three legacy airlines and other larger players have an advantage, thanks to stronger loyalty programs and a greater number of customers paying for premium seats. Plenty of other analysts agree, and the legacy airlines' dominance was part of the reason Barron's recommended buying American Airlines in February.
However there is one winner at the other end of the spectrum: He upgraded Allegiant to Buy, with a price target of $156.
Although Allegiant, with its focus on budget-focused leisure travelers, might seem like an obvious victim of any potential consumer pullback in the face of inflation, that hasn't materialized. The shares are up by a third this year, easily outpacing peers, and Godyn says the company's purchase of Sun Country, announced in January, "may be one of the best deals in the industry's history."
Synergies abound, he argues, and consensus estimates haven't caught up to the benefits as Allegiant hasn't put out the usual pro forma information analysts use for their estimates.
Godyn is therefore flying blind a bit too, but his model suggests Allegiant's "earnings power in the years to come could very well exceed the current highest estimates within consensus."
He sees the deal being more accretive than many investors think, and the combined company will benefit from limited competition, allowing its stock to get a sustained merger bump, when so many other airlines have not.
Plenty of investors are wary of the industry as a whole, with good reason. Yet it's summertime -- those worries might be due for a vacation.
Write to Teresa Rivas at teresa.rivas@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
June 26, 2026 14:25 ET (18:25 GMT)
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