Hawaiian Holdings Joins S&P SmallCap 600, Shares Gain

Shares of Hawaiian Holdings (NASDAQ:HA) have gained over 2% ever since it was announced earlier in the week that the company will make an entry into the S&P Smallcap 600 Growth index after market closes on May 28.

Hawaiian Holdings, the parent company of Hawaiian Airlines, will replace Bank of the Ozarks (NASDAQ:OZRK) which will join the S&P Midcap 400 index in place of Exelis (NYSE:XLS). Exelis is expected to be taken over by Harris Corp (NYSE:HRS). The deal is likely to be completed before market opens tomorrow.

A company needs to fulfill certain criteria to be included in the S&P 600. Its market capitalization needs to range from $400 million to $1.8 billion. Currently, the market capitalization of Hawaiian Holdings stands at $1.38 billion. Subject to periodical review to ensure uniformity with market conditions, the market capitalization of a prospective addition to an index is viewed in the context of its short and medium-term historical trends, vis-à-vis that of the industry.

The company needs to have sufficient liquidity and a reasonable price. The ratio of annual dollar value traded to float adjusted market capitalization should be 1 or greater. Moreover, the company should trade at least 250,000 shares in each of the six months leading up to the evaluation date.

For index requirements, a U.S. company needs to possess the following characteristics as well. It should file 10-K annual reports and should not be considered a foreign entity by the SEC. The U.S. portion of fixed assets and revenues must comprise a majority of the total, but should be below 50%. When there is an inconsistency among these factors, assets establish plurality. In case of incomplete asset information, revenues establish plurality. The company should follow a corporate governance structure in line with the U.S. practice.

The stock should be primarily listed on the NYSE (including NYSE Arca and NYSE MKT), the NASDAQ Global Select Market, the NASDAQ Select Market or the NASDAQ Capital Market. ADRs are not qualified for addition. The public float of the stock should be a minimum of 50%. The trailing four quarters’ average earnings surprise should be positive, along with a mandatory earnings beat in the last reported quarter.

Honolulu, Hawaii-based Hawaiian Holdings fulfills all these criteria and has thereby been added to the S&P SmallCap 600 GICS “Industrials” sector or Airlines Sub-Industry index. We note that as of Apr 30, 2015, the “Financials” sector had the highest representation (23.5%) on the S&P SmallCap 600 index. The Industrials sector came third in terms of representation (15.9%). The Telecommunication Services sector was least represented (0.7%).

As of Apr 30, the mean market capitalization of the 600 constituents was $1.2 billion, while the median market cap was nearly $1.1 billion.

Hawaiian Holdings offers non-stop service to Hawaii from multiple U.S. gateway cities, along with service from Japan, South Korea, China, Australia, New Zealand, American Samoa and Tahiti. Moreover, the company offers approximately 160 jet flights daily between the Hawaiian Islands.

Zacks Rank

Hawaiian Holdings currently carries a Zacks Rank #3 (Hold). A better-ranked stock in the airline space is JetBlue Airways Corporation (NASDAQ:JBLU) with a Zacks Rank #2 (Buy).

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