Why US Airways Shares Are Flying High

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of national airline US Airways (NYSE: LCC  ) soared as much as 11% this morning following a third round of upgrades for the entire airline sector in just a matter of a few days.

So what: The airline sector is moving across the board following price target boosts from JPMorgan Chase airline analyst Jamie Baker. Specifically, Baker cited that fuel costs have fallen by $0.40 per gallon since February, a $5.5 billion industry savings, yet consensus earnings estimates haven't moved higher. He responded by boosting US Airways' price target the most, from $14.50 to $17, but also raised the price targets on Alaska Air (NYSE: ALK  ) , Southwest (NYSE: LUV  ) , JetBlue (Nasdaq: JBLU  ) , and United Continental Holdings (NYSE: UAL  ) by about 5% to 7% for each airline.

Now what: Today's round of upgrades comes just days after analysts at Dahlman Rose and Bank of America Merrill Lynch also raised their estimates. But I have to ask: Does this really change anything? Fuel prices fluctuate all the time and the airlines seem to have a hard enough time turning a profit even when conditions are in their favor. Unlike most airlines, US Airways doesn't hedge its fuel costs, so it's my take that this is why it had the biggest price hike from Baker. Still, the airline industry is wrought with bankruptcies and debt-riddled companies. Despite the airline falling under the bankruptcy guillotine, I still see far too much worrisome debt on US Airways' balance sheet for my liking and would recommend you use today as a possible opportunity to locate your nearest exit and depart this stock.

Craving more input? Start by adding US Airways to your free and personalized watchlist so you can keep up on the latest news with the company.

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

The Motley Fool owns shares of JPMorgan Chase. Motley Fool newsletter services have recommended buying shares of Southwest Airlines. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Read/Post Comments (2) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On May 24, 2012, at 12:06 PM, thesand wrote:

    right now for the airline has differences in the outcome than 20 years ago( first they have high ticket price ,baggage fee,high demand the gas price around $100 ,also they charge high fees for cancelling or changing ticket,the weigh for the plane become less than before which lead to less fuel consumption .

    im along with delta, don't own airline stock.

  • Report this Comment On May 24, 2012, at 8:41 PM, feralblue wrote:

    don't dismiss the move to merge with American. jamie Baker is very close to the bankruptcy process AMR is undergoing

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