Is Air Canada the best airline stock in North America? Analysts forecast 48% rally over next 12 months

Air Canada investors are showing less enthusiasm. The airline\'s 1.3 per cent gain this year through Monday trails Canada\'s benchmark stock index, signaling the big run-up may be over after a quintupling in the company\'s shares since Chief Executive Officer Calin Rovinescu announced a cost-cutting strategy in June 2013.

Air Canada\’s turnaround plan has won over analysts. The airline has yet to obtain investors back aboard.

The stock boasts the highest rating among North American airlines, based on data compiled by Bloomberg, and analysts are projecting a 48 percent rally in the next 12 months. This is the best return among the 10 biggest carriers in the area.

Investors are showing less enthusiasm. Air Canada\’s 1.3 per cent gain this year through Monday trails Canada\’s benchmark stock index, signaling the big run-up may be over after a quintupling in the company\’s shares since Chief Executive Officer Calin Rovinescu announced a cost-cutting strategy in June 2013.

\”There\’s still room for that stock to increase, but a great chunk of your way has been done,\” Marc-Andre Robitaille, who holds Air Canada stock among the $800 million he oversees at AGF Investments Inc. in Montreal, said in a telephone interview. \”The fast money has been made.\”

The fast money has been made

Rovinescu is working toward a goal of cutting operating expenses, as measured through the cost to fly each seat miles, by as much as 15 per cent through 2018. He\’s packing more seats on long-haul aircraft, expanding the low-cost Rouge leisure unit and ordering new fuel-efficient jets for example Boeing Co.\’s 787 Dreamliner.

The airline is placed to release first-quarter results on May 12. Earnings is going to be 16 Canadian cents a share, in line with the average of 14 analysts\’ estimates compiled by Bloomberg, which would function as the first profit to begin the year – the slowest travel period for United states airlines – since Air Canada\’s November 2006 public offering.

Investors could get their next peek at Air Canada\’s longer-term outlook in a presentation to investors in Toronto on June 2. Rovinescu unveiled his five-year operating expense and cost goals at the last investor day two years ago.

\”The shares have experienced a tremendous recovery within the last couple of years, but now we\’re at a point where people are looking for the next leg of growth, and how we move higher came from here,\” Chris Murray, an AltaCorp Capital analyst in Toronto, said in a telephone interview.

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