NEW YORK (TheStreet) -- American Airlines Group (AAL) had its price target lowered to $44 from $46 at Credit Suisse with a "neutral" rating, while Barclays reduced its price target to $58 from $68 and maintained an "overweight" rating.
Primary risks for American Airlines include the health of the economy, fuel price volatility, event risks such as terrorism, weather, and labor disruptions, Credit Suisse noted.
Additionally, American Airlines has significant merger integration risk as it completed its merger with US Airways Group in December of 2013, while peers such as Delta Air Lines (DAL) and United Continental Holdings (UAL) consolidated much earlier, according to Credit Suisse's analyst note.
"Failure to complete certain steps necessary to begin realizing June 18, 2015 U.S. Airlines 14 synergies, such as the issuance of single operating certificate and integration of reservation systems, could negatively impact the stock," Credit Suisse analysts said.
However, Barclays maintained an "overweight" rating regarding that fundamentals for American Airlines look promising given the competitive cost structure and the potential for relative RASM improvements.
American Airlines Group is an airline holding company that operate an average of approximately 6,700 flights per day to some 54 countries.
Shares of American Airlines are up 0.63% to $40.13 in afternoon trading Thursday.
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."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- 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 ($9.03 versus $3.92).
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Airlines industry and the overall market, AMERICAN AIRLINES GROUP INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
- AAL, with its decline in revenue, slightly underperformed the industry average of 3.3%. 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.
- AAL has underperformed the S&P 500 Index, declining 5.37% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- 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