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American Airlines Dips to 52-Week Low on Multiple Headwinds

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Shares of American Airlines Group Inc. (AAL - Free Report) slipped to a 52-week low of $37.06 during the trading session on Jun 28 before retracing a bit to close at $38.20. The stock has lost 24.1% in a year’s time, wider than the industry’s 17.7% decline.



 

Reasons Behind the Stock’s Plunge

Earlier this month, a computer failure at American Airlines’ regional carrier PSA Airlines adversely impacted its crew scheduling system. The carrier’s operations went haywire as a result of this disruption and it had to call off more than 2, 500 flights.

High costs are also a persistent problem at the carrier. In the first quarter of 2018, average fuel price per gallon increased 23.6% year over year to $2.10. Fuel prices are anticipated to be even higher (between $2.18 and $2.23) in the second quarter. This downside could further pressurize the company’s bottom line in the upcoming quarter. Moreover, in April, the company trimmed its current-year adjusted earnings per share guidance due to the same reason. It now expects the metric between $5.00 and $6.00 (previous guidance had hinted at earnings between $5.50 and $6.50).

Apart from fuel costs, expenses pertaining to labor are expected to weigh on the bottom line in the current quarter. Consolidated cost per available seat miles (excluding special items and fuel) is also likely to rise 3.5% in the ongoing quarter.

The company’s high debt levels also raise concerns. This is indicated by its long-term debt-to-equity ratio of 85.2 (expressed as a percentage), which compares unfavorably with the industry average of 43.3 and the S&P 500 index’s measure of 43.1.

Downward Estimate Revisions

Due to the above-mentioned headwinds, the Zacks Consensus Estimate for the company’s current-quarter earnings has been moved 4.5% south in the last 60 days. Also, the current-year bottom line has been revised 8.3% downward over the same time frame.

The company’s unimpressive Momentum Score of D further highlights its short-term unattractiveness.

Zacks Rank & Key Picks

American Airlines carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader Transportation sector are GATX Corporation (GATX - Free Report) , Atlas Air Worldwide Holdings (AAWW - Free Report) and Expeditors International of Washington, Inc. (EXPD - Free Report) . While GATX carries a Zacks Rank #2 (Buy), Expeditors and Atlas Air Worldwide sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of GATX, Atlas Air Worldwide and Expeditors have gained more than 7%, 34% and 29%, respectively, in a year.

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