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Why Hold Strategy is Apt for American Airlines (AAL) Stock

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American Airlines Group, Inc. (AAL - Free Report) has its share of positives despite the disastrous effects from back-to-back natural calamities.

On a positive note, shares of the company have been performing well of late. The stock has gained 6.1%, outperforming the industry’s gain of 3.2% in a month.

 

 

American Airlines’ fleet modernization efforts are impressive. The company intends to spend approximately $4.1 billion this year toward fleet upgrade. It is on track to introduce 399 new planes by the year-end since the merger in December 2013.

The carrier’s initiatives to reward shareholders through share buybacks and dividend payments are also encouraging. The carrier has returned more than $10.7 billion to stockholders via share repurchases and dividends since mid-2014.

The carrier’s expansion initiatives also raise optimism. Toward this end, in March this year, American Airlines had purchased a minority stake in China Southern Airlines (ZNH - Free Report) with an investment of approximately $200 million in the Hong Kong-listed shares of China Southern. The move to expand in China is prudent considering that the country is projected to become the largest aviation market by 2024.

The carrier’s efforts to extend its European footprint are also encouraging. Last month, the company announced new flights to Europe, catering to high customer demands for Europe travel during summer. The airline will offer special summer services to Budapest and Prague from Philadelphia, plus an additional flight to Venice from Chicago, beginning May 4, 2018.

Keeping the above mentioned positives in view, we believe, investors should currently retain the American Airlines stock.

Zacks Rank & Key Picks

American Airlines currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in airline space are Air France-KLM SA (AFLYY - Free Report) and Deutsche Lufthansa AG (DLAKY - Free Report) , both sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of Air France-KLM and Deutsche Lufthansa have soared more than 100% in a year.

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