American Airlines (AAL) Cuts PRASM Guidance, Jim Cramer Weighs In

NEW YORK (TheStreet) -- Shares of American Airlines Group Inc  (AAL) were higher by 0.38% to $40.01 in afternoon trading Tuesday, reversing its losses from earlier in the session when it cut its guidance for second-quarter unit revenue and pretax margins.

TheStreet's Jim Cramer, Portfolio Manager of the Action Alerts PLUS Charitable Trust Portfolio says, "I will tell you that if the bulls win and AAL/UAL pull the others up, you have some leadership away from the fins, and that may be all the bulls need to snap down this streak in its tracks."

American, the largest U.S. airline by traffic, said its second-quarter passenger revenue per available seat mile will decline between 6% to 8%, adding to concerns about profitability in the sector.

PRASM is an important measure of performance for the airline industry.

The company lowered its guidance from its previous forecast of a 4% to 6% drop.

The carrier also lowered its pretax margin estimates by one percentage point, to between 16% to 18% for the second quarter.

Last week, peer Delta Air Lines (DAL) said second-quarter revenue based on the same measurement as American's forecast will drop by 4% to 5%, compared to its earlier projection for a decrease of between 2% to 4%. 

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.

Insight from TheStreet's Research Team:

Jim Cramer commented on American Airlines in a recent post on RealMoney.com. Here is what Cramer had to say about the stock:

Can American (AAL) lead a squeeze in the airlines? Can United (UAL) help it mount a comeback? If you care about today's session, put these five stocks right in front of you:Delta (DAL), Southwest (LUV), UAL, American and Spirit (SAVE).

These were the former leaders that have been crushed endlessly, and two of them -- AAL and UAL -- aren't down. Glory be, this is amazing given the fact that people have been bailing left and right on this group.

Yes, there are still way too many analysts who are bullish. Yes, the numbers are too high. But even the worst dogs have their day, and these are far from the worst given that their earnings aren't going to collapse, they are just going to get cut.

- Jim Cramer, 'It's a Dogfight Among the Airlines' originally published 6/9/2015 on RealMoney.com.

Want more information like this from Jim Cramer BEFORE your stock moves? Learn more about RealMoney.com now.

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 impressive record of earnings per share growth, notable return on equity and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk and a generally disappointing performance in the stock itself."

You can view the full analysis from the report here: AAL Ratings Report

  AAL Chart AAL data by YCharts

More from Markets

Apple Suppliers Slide After European, Asian Chipmakers Echo Smartphone Concerns

Apple Suppliers Slide After European, Asian Chipmakers Echo Smartphone Concerns

Global Stocks Edge Higher, But Bond Yields, Oil Prices May Test Market Strength

Global Stocks Edge Higher, But Bond Yields, Oil Prices May Test Market Strength

SAP Shares Leap After Cloud Business Prompts Full-Year Guidance Upgrade

SAP Shares Leap After Cloud Business Prompts Full-Year Guidance Upgrade

Sohn Conference Briefly Distracts From Barrage of Earnings -- ICYMI

Sohn Conference Briefly Distracts From Barrage of Earnings -- ICYMI

Dow and Nasdaq Finish Lower as 10-Year Treasury Yield Hovers Near 3%

Dow and Nasdaq Finish Lower as 10-Year Treasury Yield Hovers Near 3%