Cramer: American Airlines Group (AAL) Makes Airlines Attractive

NEW YORK (TheStreet) -- TheStreet's Jim Cramer has not recommended an airline stock since 1984, but he has embraced them wholeheartedly now thanks to the American Airlines  (AAL) and U.S. Airways merger, which he believes should never have been approved by the U.S. Department of Justice.

The merger creates a formidable carrier, but Cramer says there are numerous routes for which there is no competition now. This has provided a boost to American Airlines Group, which has doubled, and Cramer thinks it can climb even higher.

He also likes Delta Air Lines  (DAL), which he calls "incredibly well run." Cramer is also willing to buy United Continental  (UAL) and Spirit Airlines  (SAVE), but his main focus is on American Airlines Group. "If that stock comes down," he says, "buy it."


WATCH: Jim Cramer: Airlines Flying High on M&A, Improved Operations

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AAL Chart

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STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

Separately, TheStreet Ratings team rates DELTA AIR LINES INC as a "buy" with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation: 

"We rate DELTA AIR LINES INC (DAL) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its notable return on equity, attractive valuation levels, good cash flow from operations, solid stock price performance and compelling growth in net income. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Compared to other companies in the Airlines industry and the overall market, DELTA AIR LINES INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly increased by 105.63% to $1,131.00 million when compared to the same quarter last year. In addition, DELTA AIR LINES INC has also vastly surpassed the industry average cash flow growth rate of -76.05%.
  • Powered by its strong earnings growth of 98800.00% and other important driving factors, this stock has surged by 97.07% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, DAL should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Airlines industry. The net income increased by 141216.7% when compared to the same quarter one year prior, rising from $6.00 million to $8,479.00 million.
  • You can view the full analysis from the report here: DAL Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

TheStreet Ratings team rates SPIRIT AIRLINES INC as a "buy" with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation: 

"We rate SPIRIT AIRLINES INC (SAVE) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, impressive record of earnings per share growth, notable return on equity and solid stock price performance. We feel these strengths outweigh the fact that the company is trading at a premium valuation based on our review of its current price compared to such things as earnings and book value."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • SAVE's revenue growth has slightly outpaced the industry average of 26.6%. Since the same quarter one year prior, revenues rose by 27.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • SAVE's debt-to-equity ratio is very low at 0.02 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, SAVE has a quick ratio of 1.65, which demonstrates the ability of the company to cover short-term liquidity needs.
  • SPIRIT AIRLINES INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, SPIRIT AIRLINES INC increased its bottom line by earning $2.43 versus $1.50 in the prior year. This year, the market expects an improvement in earnings ($2.97 versus $2.43).
  • Powered by its strong earnings growth of 118.51% and other important driving factors, this stock has surged by 132.83% over the past year, outperforming the rise in the S&P 500 Index during the same period. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Airlines industry and the overall market on the basis of return on equity, SPIRIT AIRLINES INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
  • You can view the full analysis from the report here: SAVE Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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