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Here's Why You Should Buy American Airlines (AAL) Stock Now
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The rising air travel demand and increased capacity utilization are shaping the future performance of American Airlines(AAL - Free Report) predominantly in the domestic business.
Let’s delve into the factors that make it an investment-worthy stock.
Earnings Expectations
Earnings growth often indicates a company’s prospects. For first-quarter 2023, AAL’s earnings are expected to register 100.4% growth on a year-over-year basis. For 2023, the company’s earnings are expected to grow 332% on a year-over-year basis.
The Zacks consensus for the company’s earnings is pegged at 1 cent for first-quarter 2023 and $2.16 for the full year. This has been revised upward by 103.2% and 31.7%, respectively, in the past 60 days. The favorable estimate revision reflects the confidence of brokers in the stock.
Price performance
AAL has outperformed the Zacks Airline industry in the past six months. The stock has risen 10.4% compared to the industry's growth of 7% in the same time frame.
Image Source: Zacks Investment Research
Earnings History
In the trailing four quarters, the company has beaten the Zacks Consensus Estimate of earnings three times (missing on one instance). The average surprise is a positive of 7.8%.
Bullish Industry Rank
The industry to which American Airlines belongs currently has a Zacks Industry Rank of 66 (of 250 plus groups). Such a solid rank places the industry in the top 26% of the Zacks industries. Studies show that 50% of a stock price movement is directly tied to the performance of the industry group that it hails from.
Notably, a mediocre stock in a healthy group is likely to outperform a robust stock in a poor industry. Therefore, taking the industry’s performance into account becomes necessary.
Attractive Rank & Style Score
AAL currently has a Zacks Rank #2 (Buy) and a VGM Score of A. Our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2, offer the best investment opportunities. Thus, the company seems to be an appropriate investment at the moment. You can see the complete list of today’s Zacks #1 Rank stocks here.
Other Positive Factors
The improved air travel demand seems to benefit AAL, particularly in the domestic business. The effect of the same is visible in the recent fourth-quarter earnings of the company. The company reported earnings of $1.17 per share, outperforming the Zacks Consensus Estimate by 2.63%.
Recently, the company was declared as the eco airline of the world by Air Transport World, courtesy of its efforts and investments for fleet renewal, along with an environmentally-friendly attitude.
The carrier has taken impressive debt reduction steps as well. Management aims to reduce its debt by $15 billion by 2025-end. The company aims to attain this objective through naturally occurring amortization.
As part of the expansion drive, the carrier began service to Chetumal, Mexico, and San Andres Island, Colombia, from the Miami International Airport in December 2021. The airline’s codeshare agreement with India's low-cost airline, IndiGo, is an added positive.
The company expects the total capacity to go up 5-8% in 2023 from the previous year. The company also expects its costs to go up 2-5% with the cost of fuel per gallon pegged at $3-$3.10. The company aims at expanding its fleet size to 957 from 925 by 2022 end. All this shall enable the company to earn an adjusted operating profit margin of 7-9%.
Other Stocks to Consider
Investors interested in the Zacks Airline industry may also consider the following stocks:
Alaska Air Group, Inc. (ALK - Free Report) is being aided by the improved air travel demand situation. In the fourth quarter of 2022, ALK reported better-than-expected results. The company expects a 23-29% increase in the top line for the first quarter of 2023. ALK has been increasing its capacity to meet the upbeat demand. Capacity is expected to increase 11-14% in the first quarter of 2023
Alaska Air, currently holding the Zacks Rank of 2, has evidenced the Zacks Consensus Estimate of the company’s earnings being revised upward by 29.4% in the past 60 days.
United Airlines (UAL - Free Report) , currently carrying a Zacks Rank of 2, is seeing a steady recovery in domestic and leisure air-travel demand. On the back of upbeat air-travel demand, UAL was profitable in the fourth quarter of 2022. The fourth quarter was the third consecutive profitable quarter at UAL. Driven by solid demand, management expects total revenue per available seat mile to grow 25% year over year in the first quarter of 2023. Total revenues are anticipated to grow 50% year over year.
The Zacks Consensus Estimate of the company has been revised upward by 270% in the past 60 days.
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Here's Why You Should Buy American Airlines (AAL) Stock Now
The rising air travel demand and increased capacity utilization are shaping the future performance of American Airlines (AAL - Free Report) predominantly in the domestic business.
Let’s delve into the factors that make it an investment-worthy stock.
Earnings Expectations
Earnings growth often indicates a company’s prospects. For first-quarter 2023, AAL’s earnings are expected to register 100.4% growth on a year-over-year basis. For 2023, the company’s earnings are expected to grow 332% on a year-over-year basis.
The Zacks consensus for the company’s earnings is pegged at 1 cent for first-quarter 2023 and $2.16 for the full year. This has been revised upward by 103.2% and 31.7%, respectively, in the past 60 days. The favorable estimate revision reflects the confidence of brokers in the stock.
Price performance
AAL has outperformed the Zacks Airline industry in the past six months. The stock has risen 10.4% compared to the industry's growth of 7% in the same time frame.
Image Source: Zacks Investment Research
Earnings History
In the trailing four quarters, the company has beaten the Zacks Consensus Estimate of earnings three times (missing on one instance). The average surprise is a positive of 7.8%.
Bullish Industry Rank
The industry to which American Airlines belongs currently has a Zacks Industry Rank of 66 (of 250 plus groups). Such a solid rank places the industry in the top 26% of the Zacks industries. Studies show that 50% of a stock price movement is directly tied to the performance of the industry group that it hails from.
Notably, a mediocre stock in a healthy group is likely to outperform a robust stock in a poor industry. Therefore, taking the industry’s performance into account becomes necessary.
Attractive Rank & Style Score
AAL currently has a Zacks Rank #2 (Buy) and a VGM Score of A. Our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2, offer the best investment opportunities. Thus, the company seems to be an appropriate investment at the moment. You can see the complete list of today’s Zacks #1 Rank stocks here.
Other Positive Factors
The improved air travel demand seems to benefit AAL, particularly in the domestic business. The effect of the same is visible in the recent fourth-quarter earnings of the company. The company reported earnings of $1.17 per share, outperforming the Zacks Consensus Estimate by 2.63%.
Recently, the company was declared as the eco airline of the world by Air Transport World, courtesy of its efforts and investments for fleet renewal, along with an environmentally-friendly attitude.
The carrier has taken impressive debt reduction steps as well. Management aims to reduce its debt by $15 billion by 2025-end. The company aims to attain this objective through naturally occurring amortization.
As part of the expansion drive, the carrier began service to Chetumal, Mexico, and San Andres Island, Colombia, from the Miami International Airport in December 2021. The airline’s codeshare agreement with India's low-cost airline, IndiGo, is an added positive.
The company expects the total capacity to go up 5-8% in 2023 from the previous year. The company also expects its costs to go up 2-5% with the cost of fuel per gallon pegged at $3-$3.10. The company aims at expanding its fleet size to 957 from 925 by 2022 end. All this shall enable the company to earn an adjusted operating profit margin of 7-9%.
Other Stocks to Consider
Investors interested in the Zacks Airline industry may also consider the following stocks:
Alaska Air Group, Inc. (ALK - Free Report) is being aided by the improved air travel demand situation. In the fourth quarter of 2022, ALK reported better-than-expected results. The company expects a 23-29% increase in the top line for the first quarter of 2023. ALK has been increasing its capacity to meet the upbeat demand. Capacity is expected to increase 11-14% in the first quarter of 2023
Alaska Air, currently holding the Zacks Rank of 2, has evidenced the Zacks Consensus Estimate of the company’s earnings being revised upward by 29.4% in the past 60 days.
United Airlines (UAL - Free Report) , currently carrying a Zacks Rank of 2, is seeing a steady recovery in domestic and leisure air-travel demand. On the back of upbeat air-travel demand, UAL was profitable in the fourth quarter of 2022. The fourth quarter was the third consecutive profitable quarter at UAL. Driven by solid demand, management expects total revenue per available seat mile to grow 25% year over year in the first quarter of 2023. Total revenues are anticipated to grow 50% year over year.
The Zacks Consensus Estimate of the company has been revised upward by 270% in the past 60 days.