TD Cowen has reaffirmed its Buy rating on Sun Country Airlines Holdings (NASDAQ: SNCY) with a steady price target of $20.00.
The firm anticipates that the airline will announce its third-quarter results for 2024 in late October or early November and has stated expectations that fall below the consensus for both the third and fourth quarters of the year.
According to the firm, the challenges of 2024 are already factored into investor expectations, and the focus is now shifting to 2025.
The shift in focus is largely due to the anticipated integration of additional Amazon (NASDAQ:AMZN) aircraft into Sun Country's operations. The airline is recognized for adeptly managing the current difficult period for ultra-low-cost carriers (ULCCs).
TD Cowen predicts that Sun Country Airlines will generate significant free cash flow (FCF) over the next two years. The airline's strategic moves and financial performance are being closely watched as it navigates through the industry's current economic landscape.
In other recent news, Sun Country Airlines has been experiencing noteworthy developments. The airline recently revealed an adjusted earnings per share (EPS) of $0.06 for the second quarter of 2024, surpassing analyst expectations.
However, the company's guidance for the third quarter is set below market estimates. Susquehanna has adjusted its price target for Sun Country from $13.00 to $11.00, maintaining a Neutral rating on the stock, while TD Cowen reaffirmed its Buy rating with a steady price target of $20.00.
Sun Country reported a 2.6% decline in total revenue for the second quarter, despite growth in charter and cargo revenues. The airline anticipates a strong winter season for leisure travel and is planning aggressive capacity reallocation into charter and cargo segments. Susquehanna projects an 8% year-over-year increase in total block hours for 2025, with cargo block hours expected to rise significantly. Such developments are part of the recent news surrounding the company.
Analysts from TD Cowen anticipate that by 2026, cargo operations will account for approximately 20% of Sun Country's revenue, marking a substantial increase from the current projections.
The expectation aligns with the airline's strategic plans to expand its cargo operations around mid-2025, a move seen as a transitional period for the company.
InvestingPro Insights
Recent InvestingPro data provides additional context to TD Cowen's analysis of Sun Country Airlines (NASDAQ:SNCY). The company's market cap stands at $543.91 million, with a P/E ratio of 10.9, suggesting a relatively low valuation compared to earnings. This aligns with TD Cowen's optimistic outlook and Buy rating, despite near-term challenges.
InvestingPro Tips highlight that management has been aggressively buying back shares, indicating confidence in the company's future. This strategy could support the stock price and potentially enhance shareholder value, which is particularly relevant given TD Cowen's focus on the airline's future prospects.
However, it's worth noting that the stock price has fallen significantly over the last three months, with a 16.73% decline. This drop might reflect the current challenges in the ULCC sector that TD Cowen mentioned. Despite this, analysts predict the company will be profitable this year, supporting TD Cowen's view on Sun Country's ability to navigate the difficult period.
For investors seeking a more comprehensive analysis, InvestingPro offers 8 additional tips for Sun Country Airlines, providing a deeper understanding of the company's financial health and market position.
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