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ExpressJet Loses Some Doubters (XJT)
ExpressJet (NYSE: XJT) may face a number of the industries problems, particularly high fuel prices. But, with a fleet of small planes and service to medium-sized markets, the company has its own advantages
The short interest in ExpressJet fell from 13.5 million shares in May to 7.3 million shares in June. The number is still fairly high since the average number of shares the company trades per day is under 750,000. With the price of airline shares fairly low, it might make more sense for short interest in the company to rise.
Low Share Price, Little Risk?
ExpressJet shareholders really could not be much worse off, at least from the standpoint of its past stock price. With the exception of a couple of very brief dips in the Spring of 2006, the stock, at $5.93, is at a five-year low.
Of course, one view is that airline prices are in for more declines. With the price of oil near $69 per barrel, any further rise could increase operating expenses in the industry so that making money would become nearly impossible.
Prudential Securities even downgraded one of the most well-run carriers, Southwest (NYSE: LUV), based on concerns about rising commodities prices.
A Bit Of A Difference
Unlike a number of other airlines, ExpressJet has been profitable for the last three years and for the four most recent quarters. Even in the difficult environment earlier this year, the company had an operating profit of over $14 million on revenue of $412 million. It was not as strong as the immediately previous quarters, but it was a sign that the company could hold its head above water.
Its Own Model
ExpressJet flies 50-seat aircraft between cities on medium-length flights. It does not have to keep service staff, maintenance crews and pilots who can operate a number of different airplanes. The company flies to 150 cities in North America, and much of its revenue come from being a feeder service for Continental Airlines (NYSE: CAL) and Delta Airlines (NYSE: DAL) using the brand names Continental Express and Delta Connection.
Relations between the Continental and ExpressJet have recently been rough. The two companies recently submitted a fare dispute to arbitration. If the arbitrator sides with ExpressJet, its margins will go up significantly.
ExpressJet also has a corporate aviation service. Although this operates in a competitive environment, demand for private jet services had been rising.
Between the company's low share price and the chance that its low cost base and arbitration results could help it in future quarters, short sellers are moving out of the stock. It may well be a wise idea.
Looking to cook up a market-stomping stock portfolio? Check out our FREE report "7 Ingredients to Market Beating Stocks" and get started right now!
The short interest in ExpressJet fell from 13.5 million shares in May to 7.3 million shares in June. The number is still fairly high since the average number of shares the company trades per day is under 750,000. With the price of airline shares fairly low, it might make more sense for short interest in the company to rise.
Low Share Price, Little Risk?
ExpressJet shareholders really could not be much worse off, at least from the standpoint of its past stock price. With the exception of a couple of very brief dips in the Spring of 2006, the stock, at $5.93, is at a five-year low.
Of course, one view is that airline prices are in for more declines. With the price of oil near $69 per barrel, any further rise could increase operating expenses in the industry so that making money would become nearly impossible.
Prudential Securities even downgraded one of the most well-run carriers, Southwest (NYSE: LUV), based on concerns about rising commodities prices.
Unlike a number of other airlines, ExpressJet has been profitable for the last three years and for the four most recent quarters. Even in the difficult environment earlier this year, the company had an operating profit of over $14 million on revenue of $412 million. It was not as strong as the immediately previous quarters, but it was a sign that the company could hold its head above water.
Its Own Model
ExpressJet flies 50-seat aircraft between cities on medium-length flights. It does not have to keep service staff, maintenance crews and pilots who can operate a number of different airplanes. The company flies to 150 cities in North America, and much of its revenue come from being a feeder service for Continental Airlines (NYSE: CAL) and Delta Airlines (NYSE: DAL) using the brand names Continental Express and Delta Connection.
Relations between the Continental and ExpressJet have recently been rough. The two companies recently submitted a fare dispute to arbitration. If the arbitrator sides with ExpressJet, its margins will go up significantly.
ExpressJet also has a corporate aviation service. Although this operates in a competitive environment, demand for private jet services had been rising.
Between the company's low share price and the chance that its low cost base and arbitration results could help it in future quarters, short sellers are moving out of the stock. It may well be a wise idea.
Looking to cook up a market-stomping stock portfolio? Check out our FREE report "7 Ingredients to Market Beating Stocks" and get started right now!
by
Douglas McIntyre
Douglas A. McIntyre is the editor of 24/7 Wall St., a financial commentary site. He has been president of Switchboard.com, which was the 10th most visited website in the world, and publisher of Financial World Magazine. He has served on the board of TheStreet.com. McIntyre graduated from Harvard magna cum laude.
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