2016 Price Range: Based on 5.50 taxed eps
High: 55$ based on 10 PE due to improving prasm/revenues
Fair Value : 44$ based on realistic 8 PE
Low Value: 33$ based on 6 PE, market pullback etc
Also interesting that the street is starting to rotate to value stocks vs growth which should be very favorable to aal...I thought that was what was driving the run up in March to 44$. Big part of the rotation to value though has been the rise in oil which of course for 1-2 quarters will hurt airline profits until fares and capacity adjust. The market is looking forward to good things for value stocks but guess what, good ol aal not invited to the party so far...
The anals really did a terrible job with aal's valuation last year, they never mentioned or valued on a taxed basis. Some of them seemed entirely oblivious that earnings were not taxed, still hear some squawking about aal's PE only being 3.75 last year, unbelievable, this is the one issue that psses me off more than anything. Aal WAS fairly valued at 55-56$, it was not undervalued and is why buybacks were low 1q of 2015 (I noted) and Kirby and Kerr sold bunch of shares at I believe 50-55$...
Another turn of bad luck is aal is not being priced anywhere near airlines historical 10 PE, I thought with consolidation, record profits PE would have been at 10 (taxed) last year, it was close when pps was 55-56 but assuming 5.50 taxed this year pps should be about 55-60$....very frustrating
I took as sequential qtr to qtr which could be correct if 2q is less than 1q's (7.5) but prasm deteriorated at end of 1q and into 2q. Street and myself were expecting more like(5-7) vs guided (6-8), only 1 point but when combined with the lower margin guide of 14-16% was a double whammy. The margin decline is what surprised me, was 17.2% in 2015 with fuel at 1.85 ! This big decline in margin yoy with 4% lower revenues will result in significantly lower 2q dollar(and maybe even eps) revenues than 2015.
So did Stephens which started coverage at pt of 43$. They both came out with their ratings after I got burned on covering my calls at a loss and didn't roll them over when pps ran up to almost 44$. IMO that run up to 42-44$ was in part short covering and bounce from big selloff. There really was no change in the fundamentals...
Good points, like I mentioned , I think its a good risk/reward now if establishing a position where can buy more if stock drops from here, but for myself the downside risk is something I cant afford , just more my personal portfolio circumstances...and why its such a kck in the #$%$ that has underperformed other airlines by such a wide margin.
Jets etf down about 7% from 52w high, Aal down about 30%...short of SAVE , Aal has been the wrong airline to own the past year, even Ual stock has done better ...the hedgies knew Aal was a merger play. Teller got out little early but was good move...domestics were the right bet after the merger. SAVE made the mistake of being too aggressive with Aal and blew up prasm and other ulccs joined the party
Have not had one insider direct buy that I can recall since merger ...free candy for everyone except shareholders weasly Kirby knew what was going down when dumped shares about this time last year, believe Kerr did too and of course Pacman has Nice game they have been playing for themselves with options , buy backs , they we clean up when worm finally turns while shareholders get crumb of divy. Another negative of the cheap fuel has been the huge pay increases and now PS. Management and employees have definitely come before shareholders the past two years
You were right about diversifying and I was right that Aal inherited a lot of amr problems. ...throw in alot of bad luck ala Brazil , ulccs etc and here we are. What has surprised me is how bad yoy revenues have been. I never expected them to be down so much, thought additional flights and load factors would make up for weak prasm. I expected yoy revs to be basically flat not down 400 m a quarter..annals have been very wrong at least per Aal. Their ratings and pts have been consistently too high even King Fish has been too optimistic Cheap fuel really has been a Trojan horse in many ways. Fuel drop was too deep and therefore disruptive to capacity, economy etc
Crazy that have not raised the divvy, will do at 2q report when I doubt I'll have many shares left..20c increase will only be about 110m year more...buybacks have totaled about 10$ share, would we really be at-30$ if had higher divies and a lot less buybacks? Heck, divvy could easily have been 1$ share and still could have bought a lot of shares back and/or paid down debt. Of course the main issues hurting aal have been all the revenue and cost pressures, they are THE reason were sitting at 38$ vs 60-70$
I have really come to dislike Kirby, he sounds terrible and has been off target for over a year. For example, at 2014 4q call he basically said the expiration of the Wright Amendmend was no big deal which I rightly thought was wishful thinking..at 2015 4q call he said 1q prasm would be the "trough", wrong unless you consider down 6-8% for 2q better tthan 1q which is being kind.
Airlines may have put in a short term bottom this morning,but I will be looking to sell a lot of my remaining shares sooner vs later , don't see trading higher than 42$ for awhile and will selloff in any market pullback, my 37-42 range ended up being correct after all. If 3q prasm guide is good will look at buying. Wow, should have sold this time last year at 53$ share on day of 1q report. AAL has just way underperformed most other airlines, just too many issues the past year.Terrible luck for longs, we would be closer to 50$ if performed similar to dal/luv and would be well over 70$ if like alk/HA/VA.
Was the perfect storm for aal with Dallas/LAmerica/SAVE /Dollar/Terror/Zika et al...Parker's buybacks and taking stock as comp ended up being false optimism that likely misled a lot of investors into thinking pps would keep rising...he'll be right eventually but man what a waste of record market highs and super low fuel. If market holds uo aal will have its day in 2H at earliest imo if prasm improves. I said several times after the 2014 4q call that it was all about the base(prasm), no treble(everything else) and few agreed with me Unfortunately I was more right than even I thought...the horror
Pacman has been busy but we would likely be much farther ahead if all that buyback money was in divies instead. Been a mistake to buyback so heavily as market not rewarding it...will likely pay off long term but heck we were at 45$ in June/July 2014 ! Now likely a decent time to "establish" a position in aal, terrible for those of us that have held from 55 down. Last year on 1q report pps popped to 53$ than has done nothing but sell down since...I made a huge mistake not selling..will be looking at my gains/losses and will decide how much of remaining shares to hold...leaning to sell more vs less..my patience has definitely run out
I didn't calculate it, just comparing 2015 margin of 17.2% vs 14-15% estimate. If the 17.2 is accurate the "dollar profit" not eps will be less than 2015 2q.. where as 1q 2016 dollar profit was just slightly less than 2015's which shows how much low revenues/prasm eating up huge fuel savings.. 1q eps up 15% due to buybacks..
2q estimates may be lowered due to lower margin than last year, maybe I'm missing something but the margin guide was much less than I expected, was expecting 17-18%