The stock market has been under pressure for months, but Tuesday brought some respite for hard-hit investors. The Nasdaq Composite (NASDAQINDEX: ^IXIC) rose nearly 2% as of 11 a.m. ET, and while it remains far below its all-time highs, some encouraging signs seemed to turn market sentiment back in a positive direction.

Airline stocks did particularly well, with major companies like American Airlines Group (NASDAQ: AAL) and United Airlines Holdings (NASDAQ: UAL) climbing 10% or more Tuesday morning. Airlines across the industry announced some favorable numbers and outlooks that made shareholders feel more comfortable about the prospects for travel in the near future. 

American faces a less bad future

American Airlines provided updated financial and operational guidance for the first quarter of 2022. Its figures presented a mixed picture that nevertheless gave investors more confidence.

On the positive side, some elements of American Airlines' operations won't be as bad as initially feared. The company now believes its first-quarter revenue will drop 17% from where it was three years ago, before the beginning of the COVID-19 pandemic. That leaves plenty of room before American has made a full recovery, but it's better than the 20% to 22% drop that the airline had previously anticipated. 

However, some other aspects were more troubling. Rising crude oil prices have pushed the company's expectations for first-quarter jet fuel costs up sharply to between $2.73 and $2.78 per gallon. That increase, along with lower-than-expected capacity, should push cost per available seat mile up 11% to 13%, higher than its previous estimates for an 8% to 10% rise. With no hedging arrangements in place currently, costs for the remainder of the year are subject to significant volatility.

United sings a similar song

United similarly released its financial outlook update, which also included some numbers for the full 2022  year. Overall, the airline tried to point to encouraging travel demand as COVID-19 case counts have fallen in the U.S., but its numbers weren't as strong as American's in relation to its past guidance.

On one hand, United does expect to see slightly better revenue performance in the first quarter than it previously thought. The airline sees operating revenue at the upper end of its previous guidance for a 20% to 25% drop in comparison to pre-pandemic levels in the first quarter of 2019. United also sees positive adjusted pre-tax income for the second quarter of 2022.

However, additional flight cancellations due to geopolitical conditions have United expecting capacity for the quarter to fall 19%, worse than the 16% to 18% guidance it previously gave. Costs will rise about 18% from three years ago, with fuel prices expected to average $2.99 per gallon in the first quarter and $3.50 per gallon for the second quarter. All of those factors will likely combine to send full-year capacity figures down high single-digit percentages in 2022 compared to 2019, in United's view.

Flying higher?

Some other airline stocks saw similar patterns. JetBlue Airways (NASDAQ: JBLU) now sees revenue being down just 6% to 9% from 2019 levels, better than its previous 11% to 16% estimate. Delta Air Lines (NYSE: DAL) sees revenue recovering to down 22% from its pre-pandemic levels, improving from past guidance for a 24% to 28% reduction. And Southwest Airlines (NYSE: LUV) now sees revenue down just 8% to 10%, better than its initial 10% to 15% projection.

There's still considerable uncertainty, especially given the rise of another omicron subvariant that could be more transmissible and cause more dramatic health effects. Yet investors appear to be tired of the pessimism surrounding the airline industry. At least for today, airline shareholders are looking at the potential bright side after years of tough times. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post These 2 hard-hit Nasdaq stocks flew 10% higher Tuesday appeared first on The Motley Fool Australia.

Monday brought continued uncertainty to Wall Street, and major market benchmarks fell sharply as investors tried to figure out what the future might bring. Between soaring consumer prices, the prospect for rising interest rates, and energy markets facing another round of disruptions, market participants haven't had a clear course to follow. By 12:45 p.m. ET, that sent the Dow Jones Industrial Average (DJINDICES: ^DJI) down 667 points to 32,948. The S&P 500 (SNPINDEX: ^GSPC) fell 95 points to 4,234, and the Nasdaq Composite (NASDAQINDEX: ^IXIC) dropped 282 points to 13,031.

It was nearly two years ago that Warren Buffett faced harsh criticism for choosing to sell out of airline stocks at the beginning of the COVID-19 pandemic. The removal of United Airlines Holdings (NASDAQ: UAL), Southwest Airlines (NYSE: LUV), Delta Air Lines (NYSE: DAL), and American Airlines Group (NASDAQ: AAL) from the list of holdings at Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) struck many as being akin to panic selling, especially when airline shares moved sharply higher soon thereafter. Now, though, airlines are still struggling, and their path forward is far from certain. 

The fall, rise, and fall of airline stocks

Before the pandemic began, investors were generally well disposed to airline stocks. An impressive run of profitable years had suggested that the industry had finally found a business model that would work.

The pandemic put a stop to that optimism. Shares of airline stocks plunged 50% to 60% or more from the beginning of 2020 over the course of three months. Most airlines used bailouts to help them survive financially.

But the development and distribution of effective vaccines seemed to put an end point on the trouble for airlines. By spring of 2021, Southwest shares were back above pre-pandemic levels, while other major airlines had trimmed their losses substantially.

Now, though, airlines appear to be back in dire straits. United is down more than 60% from where it started 2020, while American has fallen by more than half. Delta and Southwest are down about 45% and 30%, respectively. Today alone, the four stocks are down between 7% and 11%.

New challenges in the skies

Problems are lining up for airlines in new and troubling combinations:

• Traffic volumes had only begun to get back to pre-pandemic levels, as pent-up demand for travel largely overcame lingering worries about new COVID-19 variants. Prospects for broader global reopening had looked better. Yet with geopolitical risks having entered the picture, those favorable trends might well reverse themselves.
• One thing that had kept airlines as healthy as they were at the beginning of the pandemic was that energy prices fell to levels not seen in decades. In two years, energy prices returned to more normal levels. Now, the possibility of oil market disruptions related to Russia and its attack on Ukraine have sent oil prices to their highest levels in more than a decade. With jet fuel being a major cost for airlines, the news wasn't welcome.

Buffett's sale hinged on the idea that the industry might never look the same as it did before the pandemic. With new communication methods making in-person travel less vital, even a partial reduction in demand would require a dramatic response from airlines. Indeed, with much weaker balance sheets for many airlines and the prospects of renewed bailout support seeming dimmer, Buffett's concerns might well turn out to have been correct.

Know your thesis

Buffett thinks long term, and it's always premature to judge long-term decisions based on how stocks move in a month, quarter, or even year. Airlines might well turn out OK from here, but it's clear that they've faced many of the ongoing uncertainties that prompted Buffett to seek greener pastures elsewhere. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Could Warren Buffett's airline sales turn out to be right after all? appeared first on The Motley Fool Australia.