American Airlines (AAL) Surges 22% in 6 Months: Here's Why

Shares of American Airlines Group Inc AAL have gained 22% in the past six months, outperforming the Zacks Airline industry’s rally of 17%.

 

 

Let’s take a look into the factors responsible for the impressive price performance.

American Airlines has an impressive earnings surprise history, having reported better-than-expected earnings per share in each of the trailing four quarters. Also, in the fourth quarter of 2017, this Fort Worth, TX- based carrier’s earnings and revenues exceeded estimates and improved year over year. Results were aided by strong demand for air travel. 

The company performed well on the unit revenue front too. Total revenues per available seat miles (TRASM) increased 5.6% (on a year-over-year basis). In fact, this marked the fifth successive quarter in which the metric grew on a year-over-year basis, since the fourth quarter of 2014. The measure is expected to lie within 2-4% in the first quarter of 2018. Apart from American Airlines, other airline players like United Continental Holdings, Inc. UAL, Hawaiian Holdings, Inc. HA and JetBlue Airways Corporation JBLU are expected to perform well on the unit revenue front in the same time period.

In fact, a solid earnings track record generally works as a catalyst in boosting the stock price. This is because it indicates the company’s ability to surpass earnings estimates. More often than not, investors take into account a company’s buoyant earnings history while betting on the stock with the expectation that it will continue surpassing earnings estimates in its next releases.

Furthermore, the company’s efforts to reward shareholders through dividends and share buybacks raise optimism on the stock’s performance. To this end, American Airlines returned $1.7 billion to shareholders through dividends and buybacks in 2017. Its employee-friendly attitude and efforts to modernize its fleet are also encouraging. Evidently, employees at American Airlines earned more than $240 million in 2017 as part of the company's profit sharing scheme.

Estimate Revisions & Style Score 

Upward estimate revisions reflect optimism in a stock’s prospects. American Airlines scores impressively on this front too. In fact, this Zacks Rank #2 (Buy) company has seen the Zacks Consensus Estimate for current-quarter and current-year earnings being revised 5.7% and 1.9% upward, respectively, in the last 30 days. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Additionally, the stock has a VGM Score of B. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three scores.

Such a score allows investors to eliminate the negative aspects of stocks and select winners. However, it is important to keep in mind that each Style Score will carry a different weight while arriving at a VGM Score.

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JetBlue Airways Corporation (JBLU) : Free Stock Analysis Report
 
United Continental Holdings, Inc. (UAL) : Free Stock Analysis Report
 
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American Airlines Group, Inc. (AAL) : Free Stock Analysis Report
 
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