Why Air Canada Shares Soared Today

Is this meaningful? Or just another movement?

The Motley Fool

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 airline operator Air Canada (TSX: AC-B) soared about 20% on Friday after its quarterly update impressed Bay Street.

So what: The stock had pulled back sharply in February on a disappointing fourth quarter, but today’s positive update is quickly easing those concerns. In fact, Air Canada posted systemwide traffic growth of 1.4% on a capacity increase of 3.6% in March, suggesting that the foreign exchange, weather, and capacity headaches that management has been dealing with are slowly letting up.

Now what: Management now expects its Q1 results to be roughly in line with last year, versus its prior view of an EBITDAR decline of $15-30 million. “In addition, based on forward bookings, we expect a strong summer travel season ahead,” said President and CEO Calin Rovinescu. “I would like to thank our employees for their hard work and transporting our customers safely to their destinations despite the ongoing challenges of severe winter weather during the month and the quarter.”

Of course, when you couple Air Canada’s 20% today with the airline sector’s notoriously limited long-term upside, the risk/reward tradeoff seems rather unattractive at this point.

 

 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Brian Pacampara owns no position in any of the companies mentioned.

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