American Airlines (AAL) Stock Soars as Crude Prices Fall

NEW YORK (TheStreet) -- American Airlines (AAL) shares are up 5.17% to $49.47 in afternoon trading on Thursday as falling oil prices leading to lower fuel costs lifted the airline sector in trading today.

Industry standard Brent crude for June delivery is down 2.88%, or $1.95 to $65.82 per barrel, while U.S. West Texas crude is also down 3.10%%, or $1.89 to $59.04 per barrel. The fall in prices comes one session after oil prices rose to five month highs yesterday.

Oil prices are declining as the dollar strengthened against foreign currencies today following the release of last weeks jobless benefit claims numbers. Claims rose by just 3,000 to seasonally adjusted number of 265,000, slightly above 262,000 claims that represents a 15 year low.

TheStreet Ratings team rates AMERICAN AIRLINES GROUP INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate AMERICAN AIRLINES GROUP INC (AAL) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its solid stock price performance, impressive record of earnings per share growth and notable return on equity. However, as a counter to these strengths, we find that the company has favored debt over equity in the management of its balance sheet."

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

  • Powered by its strong earnings growth of 100.00% and other important driving factors, this stock has surged by 37.66% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • AMERICAN AIRLINES GROUP 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. This trend suggests that the performance of the business is improving. During the past fiscal year, AMERICAN AIRLINES GROUP INC turned its bottom line around by earning $3.92 versus -$8.48 in the prior year. This year, the market expects an improvement in earnings ($9.99 versus $3.92).
  • AAL, with its decline in revenue, slightly underperformed the industry average of 2.3%. Since the same quarter one year prior, revenues slightly dropped by 1.7%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Airlines industry average, but is greater than that of the S&P 500. The net income increased by 94.2% when compared to the same quarter one year prior, rising from $480.00 million to $932.00 million.
  • The debt-to-equity ratio is very high at 6.85 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, AAL maintains a poor quick ratio of 0.83, which illustrates the inability to avoid short-term cash problems.
  • You can view the full analysis from the report here: AAL Ratings Report
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