Market Overview

Buckingham: American Airlines Has 53% Upside

Q4 13F Roundup: How Buffett, Einhorn, Loeb, And Others Adjusted Their Portfolio
The Airline Sector: American, United Have Earned An Upgrade, Bernstein Says
IBD Rating Upgrades: American Airlines Flashes Improved Price Strength (Investor's Business Daily)

American Airlines Group Inc (NASDAQ: AAL) has a 53 percent upside, according to Buckingham Research Group. In a report released on Wednesday, the firm lifted its outlook and valuation, maintaining a Buy rating and raising their target price to $64 from $61.

Buckingham's valuations imply a 53 percent upside after it factor in the stock's 1 percent dividend yield.

"A modestly better earnings outlook is behind our modestly better valuation. Over the past year, mainline PRASM has come under structural pressure from competitive capacity and currency headwinds (outside AAL's control), however, the headwinds should abate in 2H16 given capacity-driven adjustments at the industry level in conjunction with revenue initiatives worth hundreds of millions for AAL," the firm commented.

"Fleet restructuring is also driving margin improvement; in 2015, AAL retired 143 older aircraft (9 percent of the fleet), replacing them with 127 new aircraft. Separately, AAL retired ~9 percent of its outstanding shares over the past 6 months and has $2.4B remaining in its existing $6B authorization. After factoring in aircraft financing, dividends, and debt due, AAL is generating enough FCF to return another $4B (15 percent of today's market cap) in 2016," Buckingham noted.

American Airline's longer-term fundamental valuation from the firm was given a 35 percent FCF yield. Buckingham sees the risk/reward to be at a 10 percent downside, with 71 percent upside under scenarios that are worse/better versus the firm's base outlook.

Latest Ratings for AAL

Feb 2018Morgan StanleyMaintainsEqual-WeightEqual-Weight
Jan 2018BernsteinUpgradesMarket PerformOutperform
Jan 2018Morgan StanleyMaintainsEqual-WeightEqual-Weight

View More Analyst Ratings for AAL
View the Latest Analyst Ratings

Posted-In: BuckinghamAnalyst Color Price Target Analyst Ratings Trading Ideas


Related Articles (AAL)

View Comments and Join the Discussion!