WESTJET AIRLINES $33.05 - Toronto symbol WJA

WESTJET AIRLINES $33.05 (Toronto symbol WJA; TSINetwork Rating: Extra Risk) (1-877-493-7853; www.westjet.com; Shares outstanding: 127.8 million; Market cap: $4.2 billion; Dividend yield: 1.5%) serves 90 destinations in North America, Central America, the Caribbean and Europe. Its fleet of 107 modern Boeing 737s are 30% more fuel efficient than older jets.

In June 2013, the company launched WestJet Encore, its Canadian regional airline. This business now operates 13 Bombardier Q400 NextGen turboprop planes, which seat 78 passengers.

In the three months ended June 30, 2014, WestJet’s earnings rose 15.9%, to a second-quarter record of $51.8 million from $44.7 million a year earlier. Earnings per share gained 17.6%, to $0.40 from $0.34, on fewer shares outstanding. This was WestJet’s 37th consecutive quarter of profitability.

Revenue rose 10.2%, to $930.3 million from $843.7 million.

The Canadian airline market is highly competitive, especially with Air Canada expanding its Rouge budget airline to more leisure destinations in Europe, the Caribbean, Mexico and the U.S. As well, WestJet’s competition may soon include U.S.-based discount carrier Southwest Airlines, which is considering expanding internationally, and potentially into Canada.

However, demand for the company’s flights remains high, and it continues to enter into new partnerships with other airlines. WestJet Encore is also performing well. All of these strengths should keep West- Jet’s revenue—and profits—growing.

WestJet is a buy.

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