SNCY: Earnings Should Strengthen As Cargo Operations Reach Full Potential

Narrative Update

The analyst price target for Sun Country Airlines Holdings has edged higher by approximately $2 to the low $20s, as analysts point to added 2027 estimates, cargo operations nearing full potential, and firmer passenger yields at Minneapolis Saint Paul as key supports for modestly stronger earnings power, even though they are making only incremental tweaks to growth and margin assumptions.

Analyst Commentary

Recent commentary from Wall Street points to a more constructive stance on Sun Country Airlines Holdings, with multiple firms lifting price targets into the low to low mid 20s as they refresh models to include 2027. While the tone is broadly positive on earnings power and strategic positioning, there remains a split between those focused on near term execution risks and those emphasizing the longer term margin and cash flow opportunity.

Bullish Takeaways

• Bullish analysts see cargo operations reaching full potential as a structural earnings driver that supports higher long term valuation multiples, given the more resilient, contracted nature of this revenue stream.
• Improved passenger yields at Minneapolis Saint Paul, underpinned by a healthier supply and demand balance, are viewed as evidence that the carrier can defend pricing and expand margins without relying solely on capacity growth.
• The introduction of 2027 estimates, with some forecasts running above current consensus, reflects confidence that Sun Country can compound earnings beyond the near term, supporting raised price targets toward the low to low mid 20s.
• Bullish analysts argue that profits in the U.S. airline industry are increasingly concentrated among better positioned carriers, and place Sun Country within the group that can capture a disproportionate share of that profitability through disciplined growth and cost control.

Bearish Takeaways

• More cautious analysts maintain neutral stances, signaling that while upside exists, it is partly priced in and dependent on consistent execution in both the cargo and passenger segments.
• There is concern that the broader U.S. airline industry remains in the early stages of a structural transition toward more technology driven merchandising, raising the bar for sustained revenue growth and competitive differentiation.
• Some see the ongoing concentration of industry profits as a risk for smaller or less diversified carriers, and question whether Sun Country can fully match the scale, loyalty economics, and balance sheet strength of the largest network peers over time.
• Macro uncertainty, including demand normalization and potential cost pressures, is cited as a constraint on further multiple expansion until Sun Country demonstrates that its enhanced earnings profile is durable through different parts of the cycle.

What's in the News

• Plans to open a new operational base at Cincinnati/Northern Kentucky International Airport in early 2026. This will anchor cargo aircraft and crews at a key Amazon hub while positioning for future passenger network growth. (Company announcement)
• Fleet service workers overwhelmingly ratified a first three year collective bargaining agreement with Teamsters Local 970, securing higher wages, stronger job protections, and expanded safety and benefits provisions. (Labor agreement disclosure)
• Completed a $10 million share repurchase of 843,107 shares, or about 1.58% of shares outstanding, under the buyback program announced on May 1, 2025. (Capital allocation update)
• Reported third quarter 2025 operating metrics showing lower revenue passengers miles and capacity year over year, with a slightly higher quarterly load factor of 84.8%. (Earnings release)
• Issued fourth quarter 2025 guidance, projecting total revenue of $270 million to $280 million and an operating margin of 5% to 8%. (Guidance update)

Valuation Changes

• Fair Value: edged down slightly from approximately $18.13 to about $17.78 per share, reflecting a modest reduction in modeled intrinsic value.
• Discount Rate: declined marginally from roughly 10.06% to about 9.88%, implying a slightly lower required return in the updated assessment.
• Revenue Growth: eased slightly from around 8.35% to about 8.19% annually, indicating a small tempering of forward growth expectations.
• Net Profit Margin: improved modestly from approximately 11.40% to about 11.45%, pointing to a minor uplift in long term profitability assumptions.
• Future P/E: moved down slightly from roughly 7.69x to about 7.50x, suggesting a marginally lower valuation multiple applied to future earnings.