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American Airlines stock target cut on adjusted guidance

EditorNatashya Angelica
Published 05/29/2024, 11:23 AM

On Wednesday, American Airlines (NASDAQ:AAL) saw its price target lowered by TD Cowen to $16.00 from $18.00, while the firm maintained a Buy rating on the stock. The adjustment came after the airline announced the impending departure of its Chief Commercial Officer (CCO) and revised its second-quarter financial guidance downward, citing a weaker-than-expected revenue per available seat mile (RASM).

The airline's announcement was made after the market closed on Tuesday, revealing that the CCO would leave the company in June. This news was followed by the CEO's scheduled public appearance on Wednesday at 9 AM ET.

In the update, American Airlines also reduced its forecast for adjusted earnings before interest and taxes (EBIT) margin and adjusted earnings per share (EPS) for the second quarter, attributing the revision to softer RASM, which measures revenue performance.

The revision in financial guidance is not anticipated to surprise investors, according to the firm, as ultra-low-cost carriers (ULCCs) had previously indicated softening domestic revenue trends. Following this development, American Airlines is expected to modify its business strategy once more, with particular attention to the challenges facing its U.S. domestic short-haul operations.

The airline's revised outlook and the departure of a key executive come at a time when the industry is still navigating the recovery path from the impacts of the pandemic. American Airlines is now focusing on adjusting its business plan to address the current market conditions and improve its financial performance.

InvestingPro Insights

In light of American Airlines' recent adjustments to its financial guidance and executive changes, it's pertinent to consider the company's current financial health and market performance. According to InvestingPro data, American Airlines has a market capitalization of $7.53 billion and a P/E ratio of 14.84, which reflects investor expectations of future earnings.

Notably, the company has been profitable over the last twelve months with a reported net income growth expectation for this year. This is corroborated by the fact that 11 analysts have revised their earnings projections upwards for the upcoming period, suggesting a potential positive shift in the company's performance.

While the airline does operate with a significant debt burden and its short-term obligations exceed its liquid assets, analysts predict American Airlines will maintain profitability this year. This aligns with the company's strategic focus on adjusting its business plan to current market conditions.

Despite the volatility in stock price movements, American Airlines remains a prominent player in the Passenger Airlines industry. For investors seeking more detailed analysis and additional insights, there are over 8 InvestingPro Tips available, which can be accessed through the dedicated InvestingPro page for American Airlines. To enrich your investment strategy, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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