JP Morgan analyst Jamie Baker, one of the smartest and most respected analysts, period, had this to say in his latest note following the recent ER CC.
"2014 and 2015 estimates lifted – Our untaxed $4.08/$5.74 rise to $5.00 and $6.35, comparing favorably to the $3.58/$4.48 consensus. We’d estimate that Street numbers potentially next move up to the $4.50/$5.50 range near term, given the handful of apparent pessimists (relative to the 100% Buy rating for DAL). If so, this would roughly match consensus expectations for UAL. Put differently, AAL appears to trade at a 30% discount on P/E to UAL, a too-steep discount (in our view) given management integration experience and a margin starting point similar to DAL.
Capital return under way, albeit slowly – In responding to our opening question on cash priorities and milestones for cash return to stakeholders, and in answering subsequent questions on the topic, we believe management was clear that $10bn+ in liquidity is inefficient and simply not needed or desired. The payment of withholding taxes in cash rather than through share distributions (and the resulting somewhat lower share count than prior guidance) is only the first step in the process of right-sizing the company’s cash and liquidity. While management fell short of endorsing our ~$5bn estimate as the target for “working capital” liquidity, the tone was crystal clear to us and hopefully anyone listening – this is a management team that wants to reward stakeholders with more aggressive debt repayment and/or capital return in the form of share repurchases down the road once a yet-to-be publicized set of integration milestones are met. While we still can’t pinpoint the timing of a Delta-like capital return program, we strongly feel one is coming, and it won’t take several years to arrive.
Baker is aware of the promise and potential but we all need to be equally aware of the risks. His earnings estimates are generous and is in line with my expectations. There will be this economy and fuel overhang and some price overshoots and corrections. As far as AAL is concerned, it is in a far better status than LCC was at its peak of 62+ (when Baker projected a pps of $100?) - in any number of ways - industry status domestically as well as compared to rest of the world, AAL books including debt structure and cost, NOL, labor status, US fuel picture, AAL as undisputed leading airline, ...It can be worth $100 in a couple of years with a DAL like or better earnings % (say 8-10% of revenue of 50-60B) and a PE of 10-12 ...
Let's just count the chickens now, not the eggs yet, as the uncle might say ...
His writings are a puzzle ...
(PS: I owned LCC a little before the '60s', and painfully on its way down, many times. I was in at the 2s and 3s as well and on and off to 11s and 16s..). Recovered all losses by LCC and gained quite some with Aamrq!).
Also, another 2B in 'loss claims' for 2013, added to NOL?.
Got that, they're one of the 15 analysts who follow AAL, I've been asking people to REPORT here immediately if they see further upgrades from Barclays, last seen on 12/17 with $30 target, UBS, last seen on 12/18 with $29 target, or The Buckingham Reseach, long time no see.
Uncle Chang has STOP on AAL to unload more old LLC shares, same old strategy for diversifying. Uncle Chang is not just long-term investor, also Pro Trader, not normal DayTrader but good Street Fighter. It's a jingle out there nowadays with Dow Jokes bleaching 100 dma and it's only 1.5% above 200 dma, Uncle must collect some high yield large cap "Safe Havens" at costs.