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A Wall Street analyst says he is bullish on the sector's recovery.

Quarterly earnings came in well ahead of expectations.

Order Reprints Text size Delta Air’s disappointing earnings report isn’t stopping Wall Street from maintaining a bullish outlook, pegged to a second-half recovery. Patrick T. Fallon / AFP via Getty Images Airline investors aren’t expecting much this earnings season and are looking ahead to the second half of the year. That narrative appeared to take hold after Delta Air Lines (ticker: DAL) missed fourth-quarter-earnings estimates and issued guidance below consensus estimates for the first quarter. Delta’s results don’t bode well for the two other ful...

Text size The pandemic can’t end soon enough for airlines, but investors have priced the carriers’ shares as if the end is in sight. Airline stocks have climbed sharply as vaccine approvals have lifted hopes for travel, and they are no longer bargains. The sector has gained 39% since early November, versus 13% for the S&P 500. While a few stocks look appealing as longer-term bets, investors might need to ride out some turbulence. Airlines have hardly found their wings. Domestic travel is hovering at 35% of prepandemic levels, while international is down more than 80%. A $15 billion...

Source: Shutterstock Allegiant focuses on domestic leisure travel. That, combined with its industry-low costs, is a big reason why, in late October, the airlines reported that it was “flirting with cash-flow break-even.” It added that “while the environment remains fluid and bookings will certainly ebb and flow, our data suggests these average booking levels are sustainable moving forward.” Moreover, airline’s third quarter operating profit, excluding certain items but including the money from the U.S. government, came in at break-even. As of the end of Q3, its current ratio was a m...