I missed Air Canada’s amazing run, Barry Schwartz says

The grounding of Boeing 737 Max jets may have put a kink in Air Canada’s (Air Canada Stock Quote, Chart, News TSX:AC) plans this year but the company’s financials sure look good, says portfolio manager Barry Schwartz, who’s now kicking himself for not buying the stock when it was dirt cheap.

Testimony continued on Wednesday from Boeing CEO Dennis Muilenburg who faced the US House Transportation Committee on the company’s role in two fatal crashes of the 737 Max, one occurring this past March and the other last October.

Yesterday, Muilenburg acknowledged that Boeing is responsible for not giving its 737 Max pilots more information on the plane’s MCAS stall-prevention system, which sources say played a role in the two crashes. Today, the CEO admitted that it was a mistake to base the MCAS system on one sensor, with US lawmakers suggesting that a “pattern of extraordinary production pressure” at Boeing, aimed at staying ahead of its main competitor, Airbus, could have been a factor in causing the tragedies.

For its part, Air Canada has said that the grounding of its fleet of 737 Max jets “exacted a toll” on the company, especially during its peak summer season. Air Canada released its third quarter financials on Tuesday, coming in with $5.53 billion in revenue, three per cent lower than a year earlier. Yet the company’s earnings per share climbed eight per cent to $2.27 per share, which was under the consensus expectation from analysts at $2.34 per share.

Air Canada president and CEO Calin Rovinescu touted the company’s strong quarterly numbers, saying that the company’s record operating revenues came at a time when Air Canada is facing headwinds from the Max groundings.

“Impressive as such strong results are on their own, they are even more meaningful given that we achieved them despite the serious disruption to our operations and to our cost structure created by the Boeing 737 MAX grounding. Our record performance is a testament to the resourcefulness, skill and dedication of the entire Air Canada team, and I applaud and thank them for their hard work taking care of our customers since the Boeing 737 MAX grounding occurred,” said Rovinescu in a press release.

Schwartz agrees that Air Canada’s numbers look good and that investors who had the foresight to get in on the stock earlier this decade should be happy campers by now.

“Shareholders have nothing to cry about, those who bought it after the bankruptcy. I think it’s been the best-performing stock on the TSX market over the last five years, just unbelievably crushing it from $2 to $45,” said Barry Schwartz, chief investment officer and portfolio manager for Baskin Wealth Management, to BNN Bloomberg on Tuesday.

“This quarter may not have hit analysts’ targets but ignoring that, these are pretty good results. And when the Boeing Max comes back into play, you should expect things to improve, as long as the Canadian economy remains strong,” Schwartz says.

“I’m an idiot for not owning this stock, and I think that a lot of Canadian missed it — we were burned so many times, the balance sheet was terrible and the boom-bust of the airlines. But now, of course, the game has changed,” he says.

Currently, Air Canada has 400 pilots trained for the 737 Max and owns 24 Max jets, representing 9.6 per cent of its fleet.