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American Airlines Group (AAL) Stock Touches 52-Week Low
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Shares of Fort Worth, TX-based American Airlines Group (AAL - Free Report) tumbled to a 52-week low of $30.37during the course of the trading session on Jun 4. Shares of the carrier, however, recovered marginally to close the trading session at $30.81.
PRASM Woes Continue to Hurt
American Airlines, like many other carriers is suffering from woes related to passenger revenue per available seat mile (PRASM: a key measure of unit revenue). During the first quarter of 2016, the carrier reported a 7.5% decline in PRASM. The decline can mainly be attributed to adverse foreign exchange movements.
That PRASM woes will continue to hurt the carrier was evident from its second-quarter PRASM guidance. In fact, PRASM-related woes were primarily responsible for the top line shrinking 4% in the first quarter. The key metric is expected to decline in the range of 6% and 8% in the second quarter. Also, PRASM-related woes are primarily responsible for the stock shedding over 27% of its value so far this year.
It is a well-documented fact that cheap oil has benefitted airline stocks immensely with respect to bottom-line expansion and American Airlines is no exception. The carrier, which does not hedge fuel costs, expects to generate savings of approximately $1.6 billion due to weak fuel prices in 2016. However, lower fuel surcharges on international flights due to weak oil prices have been one of the main reasons for the persistent decline in PRASM. Consequently, plunging oil prices have become a double-edged sword for carriers.
We are also concerned about the weak traffic numbers posted by the company for the month of April. In April, traffic contracted 0.2% while capacity climbed 1.3%. Load factor (the percentage of seats filled with passengers) fell 120 basis points to 80.4% in April as traffic contracted while capacity expanded. Continuous decline in load factor can hurt the stock significantly.
Estimates on the Downswing
The downward earnings estimate revisions reflect pessimism over prospects of this Zacks Rank#3 (Hold) stock. Over the last 90 days, the 2016 Zacks Consensus Estimate for earnings has gone down $1.02 to $5.76 per share. Likewise, the Zacks Consensus Estimate for 2017 has plummeted 32 cents over the same time period to $6.15 per share. Earnings per share are expected to contract 12.8% on a long-term basis, further highlighting the gloomy scenario.
Stocks to Consider
Some better-ranked stocks in the airline space are SkyWest, Inc. (SKYW - Free Report) , Air France-KLM SA (AFLYY - Free Report) and GOL Linhas . SkyWest and Air France sport a Zacks Rank#1 (Strong Buy) while GOL Linhas carries a Zacks Rank # 2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.Click to get this free report >>
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American Airlines Group (AAL) Stock Touches 52-Week Low
Shares of Fort Worth, TX-based American Airlines Group (AAL - Free Report) tumbled to a 52-week low of $30.37during the course of the trading session on Jun 4. Shares of the carrier, however, recovered marginally to close the trading session at $30.81.
PRASM Woes Continue to Hurt
American Airlines, like many other carriers is suffering from woes related to passenger revenue per available seat mile (PRASM: a key measure of unit revenue). During the first quarter of 2016, the carrier reported a 7.5% decline in PRASM. The decline can mainly be attributed to adverse foreign exchange movements.
That PRASM woes will continue to hurt the carrier was evident from its second-quarter PRASM guidance. In fact, PRASM-related woes were primarily responsible for the top line shrinking 4% in the first quarter. The key metric is expected to decline in the range of 6% and 8% in the second quarter. Also, PRASM-related woes are primarily responsible for the stock shedding over 27% of its value so far this year.
It is a well-documented fact that cheap oil has benefitted airline stocks immensely with respect to bottom-line expansion and American Airlines is no exception. The carrier, which does not hedge fuel costs, expects to generate savings of approximately $1.6 billion due to weak fuel prices in 2016. However, lower fuel surcharges on international flights due to weak oil prices have been one of the main reasons for the persistent decline in PRASM. Consequently, plunging oil prices have become a double-edged sword for carriers.
We are also concerned about the weak traffic numbers posted by the company for the month of April. In April, traffic contracted 0.2% while capacity climbed 1.3%. Load factor (the percentage of seats filled with passengers) fell 120 basis points to 80.4% in April as traffic contracted while capacity expanded. Continuous decline in load factor can hurt the stock significantly.
Estimates on the Downswing
The downward earnings estimate revisions reflect pessimism over prospects of this Zacks Rank#3 (Hold) stock. Over the last 90 days, the 2016 Zacks Consensus Estimate for earnings has gone down $1.02 to $5.76 per share. Likewise, the Zacks Consensus Estimate for 2017 has plummeted 32 cents over the same time period to $6.15 per share. Earnings per share are expected to contract 12.8% on a long-term basis, further highlighting the gloomy scenario.
Stocks to Consider
Some better-ranked stocks in the airline space are SkyWest, Inc. (SKYW - Free Report) , Air France-KLM SA (AFLYY - Free Report) and GOL Linhas . SkyWest and Air France sport a Zacks Rank#1 (Strong Buy) while GOL Linhas carries a Zacks Rank # 2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.Click to get this free report >>