American Airlines (AAL) Stock Is Up After Revising Fuel Cost Outlook

NEW YORK (TheStreet) -- Shares of American Airlines Group  (AAL) are up 1.61% to $49.83 in afternoon trading on Monday, following the airline's revised fuel cost outlook for the second quarter.

The largest U.S. airline by traffic hiked its fuel cost outlook by 10 cents per gallon for the second quarter.

American now expects between $1.94 to $1.99 per gallon, up from prior guidance of $1.84 to $1.89 per gallon.

The company also lowered its pretax margin forecast to between 17% to 19% for the period, down from their prior estimate of between 18% to 20%.

However, Cowen analysts don't think higher fuel costs are bad news for American.

The firm thinks the costs are already "baked into" the stock after its shares under-performed competitors during the first four months of the year, according to Barron's.

American Airlines provides scheduled jet service to approximately 160 destinations throughout North America, the Caribbean, Latin America, Europe and Asia.

The company is based in Fort Worth, Texas.

Separately, 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 31.81% 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 ($9.95 versus $3.92).
  • Net operating cash flow has significantly increased by 98.56% to $2,494.00 million when compared to the same quarter last year. Despite an increase in cash flow, AMERICAN AIRLINES GROUP INC's average is still marginally south of the industry average growth rate of 99.28%.
  • 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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