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American Airlines (AAL) Down 26% YTD: Fuel Costs to Blame?
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Shares of American Airlines Group Inc. (AAL - Free Report) have lost 26.7% so far this year due to several headwinds.
Let’s delve deeper into the factors hampering the company’s growth.
Since the start of this year, American Airlines has been grappling with fuel cost woes. Similar to the first quarter, results in the second quarter too were hurt by rising fuel expenses. The company’s earnings in the period decreased year over year, primarily on high fuel costs. Average fuel price per gallon surged 37.5% year over year to $2.24 per gallon in the quarter.
Moreover, with fuel costs anticipated to continue the upward swing throughout 2018, the company trimmed its full-year earnings per share guidance for the second time this year. Adjusted earnings per share in 2018 are now expected between $4.50 and $5 (previous projection hinted at a range of $5-$6). Fuel expenses are expected between $2.18 and $2.23 per gallon in 2018, approximately 30.4% higher than the 2017 figure.
Another event, which took a toll on the company, was the computer failure at its regional carrier PSA Airlines in June. This technical glitch adversely impacted its crew scheduling system, resulting in more than 2, 500 flight cancellations. Flight cancellations in such large numbers lead to significant revenue loss and thus hamper performance of the company.
Further, high-debt levels add to the company’s woes. This is indicated by its long-term debt-to-capitalization (expressed as a percentage) ratio of 85.2, which compares unfavorably with the industry average of 45.1 and also the S&P 500 index’s tally of 42.9.
No wonder even the company carries a Zacks Rank #5 (Strong Sell). The negative sentiment surrounding the stock is further highlighted by the Zacks Consensus Estimate for current-quarter earnings being revised 30.6% downward over the past 60 days. Also, the same for full-year earnings has been moved 11.7% south in the last 60 days.
Shares of SkyWest, GATX and Trinity have rallied more than 78%, 35% and 30%, respectively, in a year.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
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American Airlines (AAL) Down 26% YTD: Fuel Costs to Blame?
Shares of American Airlines Group Inc. (AAL - Free Report) have lost 26.7% so far this year due to several headwinds.
Let’s delve deeper into the factors hampering the company’s growth.
Since the start of this year, American Airlines has been grappling with fuel cost woes. Similar to the first quarter, results in the second quarter too were hurt by rising fuel expenses. The company’s earnings in the period decreased year over year, primarily on high fuel costs. Average fuel price per gallon surged 37.5% year over year to $2.24 per gallon in the quarter.
Moreover, with fuel costs anticipated to continue the upward swing throughout 2018, the company trimmed its full-year earnings per share guidance for the second time this year. Adjusted earnings per share in 2018 are now expected between $4.50 and $5 (previous projection hinted at a range of $5-$6). Fuel expenses are expected between $2.18 and $2.23 per gallon in 2018, approximately 30.4% higher than the 2017 figure.
Another event, which took a toll on the company, was the computer failure at its regional carrier PSA Airlines in June. This technical glitch adversely impacted its crew scheduling system, resulting in more than 2, 500 flight cancellations. Flight cancellations in such large numbers lead to significant revenue loss and thus hamper performance of the company.
Further, high-debt levels add to the company’s woes. This is indicated by its long-term debt-to-capitalization (expressed as a percentage) ratio of 85.2, which compares unfavorably with the industry average of 45.1 and also the S&P 500 index’s tally of 42.9.
No wonder even the company carries a Zacks Rank #5 (Strong Sell). The negative sentiment surrounding the stock is further highlighted by the Zacks Consensus Estimate for current-quarter earnings being revised 30.6% downward over the past 60 days. Also, the same for full-year earnings has been moved 11.7% south in the last 60 days.
Key Picks
Some better-ranked stocks in the broader Transportation sector are SkyWest, Inc. (SKYW - Free Report) , GATX Corporation (GATX - Free Report) and Trinity Industries, Inc. (TRN - Free Report) . While SkyWest and Trinity sport a Zacks Rank #1 (Strong Buy), GATX carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Shares of SkyWest, GATX and Trinity have rallied more than 78%, 35% and 30%, respectively, in a year.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
See This Ticker Free >>