Airline stocks have quietly taken flight, massively outperforming the broader market in recent months as travel demand continues to rise.

After grappling with post-COVID challenges, the airline industry is finally back in favor, and investors are taking notice. United Airlines (UAL), American Airlines (AAL), and Alaska Air Group (ALK) stocks have surged over the past three months, with more appreciation likely on the horizon.

These stocks combine impressive momentum with attractive valuations and top Zacks Ranks, signaling positive earnings revisions and potential for continued strength. For investors seeking to capitalize on a resurgent industry, these airline stocks deserve a closer look.

Image Source: TradingView

Airline Stocks Experience Huge Earnings Upgrades

With rising expectations for travel, especially international travel and premium travel services, analysts have been raising earnings estimates. United Airlines, Alaska Air Group and American Airlines all boast Zacks Rank #1 (Strong Buy) ratings.

Among the group, American Airlines has experienced the most dramatic improvement in earnings expectations. Alaska Air Group and American Airlines have seen substantial upgrades to their earnings forecasts as well.

It is worth noting that each of these stocks reports earnings within the next two weeks so there may be some volatility ahead. According to the Zacks Earnings ESP, AAL is expected to beat estimates by 7.25%, ALK is expected to miss by -0.11% and UAL is expected to miss by -0.22%.

Image Source: Zacks Investment Research

Airline Shares Trade at a Discount to Growth

All three stocks are currently trading at earnings multiples slightly above their long-term medians, but when factoring in their growth potential, they may be trading at a discount. This is evident in their price-to-earnings-to-growth (PEG) ratios, all of which are below 1—a level that typically signals undervaluation relative to growth.

American Airlines stands out with an exceptionally low PEG ratio of just 0.21, Alaska Air Group follows with a PEG ratio of 0.67 and United Airlines, with a PEG ratio of 0.96, also appears attractively priced.

These metrics suggest that despite their recent strong performance, these airline stocks could still offer investors significant upside potential.

Image Source: Zacks Investment Research

Should Investors Buy Shares in UAL, AAL and ALK?

The airline industry’s resurgence presents a compelling case for investors. United Airlines, American Airlines, and Alaska Air Group have demonstrated a combination of strong earnings momentum, favorable valuation metrics, and significant upward revisions to their earnings estimates.

However, the upcoming earnings reports for these airlines may bring short-term volatility. Investors should weigh the potential for positive surprises—like American Airlines’ projected earnings beat—with the risk of minor misses from United Airlines and Alaska Air Group, as indicated by Zacks Earnings ESP.

For those looking to tap into a growth story backed by attractive valuations and market-leading positions, UAL, AAL, and ALK stand out as promising picks. As always, investors should carefully consider their risk tolerance and investment objectives before jumping on board.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

United Airlines Holdings Inc (UAL) : Free Stock Analysis Report

American Airlines Group Inc. (AAL) : Free Stock Analysis Report

Alaska Air Group, Inc. (ALK) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research