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American Airlines Group Inc. Message Board

airlineprofessor 3 posts  |  Last Activity: Oct 23, 2014 3:09 PM Member since: Dec 9, 2013
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    My view

    by airlineprofessor Oct 8, 2014 1:02 PM
    airlineprofessor airlineprofessor Oct 23, 2014 3:09 PM Flag

    I am bumping my last post, which was made a couple of weeks ago. I don't post as frequently as many on the board do, but I am continually following the story, and my view that any weakness at that point was a buing opportunity has proven to be true, to say the least.
    But that was "yesterday" and the news today is even BETTER.
    AAL guided up VERY significantly Based on previous guidance and analyst estimates, the pretax margin for the fourth quarter was aprox 8-10 percent. The 4th guidance given TODAY is 10-12 percent. HUGELY HIGHER than previously expected.
    They guided fuel cost around $2.60ish for the quarter.
    This means fourth quarter estimates which were raised after the oct 8th traffic report are still much too LOW. Estimates will be raised and we will see them in analyst notes in the coming hours and days.
    I do not think that the above is currently fully realized by many trading the stock today.
    Also in the last part of the cc, a reporter asked about bookings in light of the recent ebola fears, the answer, "STRONG, no impact by the ebola fears".
    Accordingly I would use any weakness to cover short positions and accumulate shares.

  • airlineprofessor by airlineprofessor Oct 8, 2014 1:02 PM Flag

    Today's traffic report had offsetting factors.
    First , the foreign currency effects (strong dollar) will cause negative effect on third quarter of about $50 million. PRASM guide in line, put it all together and I see the 3Q earnings coming in about ten cents lighter than current consensus Fuel savings from the recent declines in oil won't be seen in 3Q due to the lag of refining etc. but the offset is
    management is now guiding for 4Q fuel savings to be on the order of $300 million . Also guiding a decrease in 4Q capacity
    Assuming a PRASM that will be somewhere near flat, and the $300 million fuel savings translates into the equivalent of about a 3% RASM would have done, so net net, earnings estimates for the 4Q are too low and should be increased by at least or more than the 3Q decrease.
    The analysts are already in the process of decreasing the 3Q estimates, plus the down in the stock price is already reflecting worse than what can be attributed to the size of the decrease, so net net , AAL should be in pretty good shape as the market digests all the data over the next couple weeks leading into and after earnings report/ 4Q guidance. . Given the current nervous situation in the markets , it is not surprising to see today's down on the 3Q decrease, but as the market digests the powerful fuel savings along with still good RASM outlook, I would look upon today's or any further weakness to be a nice buying opportunity.

  • airlineprofessor by airlineprofessor Sep 9, 2014 9:26 AM Flag

    I don't post as frequently as some, but it does not mean that I have lost interest in following AAL,
    Today's traffic report is right in line with my expectations , in line with my last posts which indicated that domestic demand is still very good, and that international demand/supply picture had softened slightly
    To view this in perspective, even the international business is still very profitable at this point, but it is softened relative to the euphoric picture we had evolved into earlier in the year.
    Keep in mind that the market should have been expecting this after DAL's traffic report a few days ago, as both stocks got hit on that report, and not only on that report, both stocks have corrected quite significantly from the highs they saw earlier in the summer.
    AAL management just needs to adjust capacity internationally (DAL too) and I have no doubt they will do that. The investment thesis in AAL and the major airlines is still very much intact , but those that expected a return to "new highs in the next week" will be disappointed with the reality.
    So while today's report does not fuel the extreme euphoric view that existed earlier, with the already significant correction he fundamental fact that PRASM and earnings are very high, it is arguable that it is not the time to start selling or shorting now.
    Another thing to consider, AAL is the world' s largest airline, but has not yet been named to the S&P500 index since the merger on dec 9. IMHO, it is not a matter of if, only when, they will be added, which will cause a significant increase in buying of the shares and a higher share price.

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