Cowen downgrades JetBlue, American and United on rich valuations

A JetBlue Airways Corp. plane taxis past an American Airlines plane at LaGuardia Airport in New York.
Scott Eells | Bloomberg | Getty Images

Valuations for airlines stocks reached new highs after the U.S. presidential election, a reason why investors should lower exposure to the sector, according to Cowen, which downgraded JetBlue, American Airlines and United Continental to market perform from outperform.

"Airline shares and multiples were up ~29 percent and ~37 percent in 4Q16 [fourth quarter] as demand and business yields improved post the U.S. presidential election. The share gains are the result of multiple expansion and not earnings improvement," equity analyst Helane Becker wrote in a note to clients Wednesday.

Becker believes slowing capacity growth in 2017, along with margin compression due to higher jet fuel and labor costs could impact earnings.