Yes Parker could have at least said demand is strong and expecting very busy summer etc, maybe he did but I don't remember it. Leads me to think may miss 2q estimates and/or next 6-12 months will be getting more challenging vs less and that's not really factoring merging the reservation system and operational issues that need addressed. Little bit of bait and switch by Parker promoting all stock comp and than talking up capacity issues.
//It IS what it IS, plain and simple. Just reiterate their guidance will be enough, how hard is it to do?//
Reiterating guidance would help a lot..right now there is an info void that is causing a lot of angst and rightly so imo...the market does not like wishy washy outlooks especially in airline sector. I for example have lost a lot of confidence in aal's 6-12 month outlook and am looking for management to say something to change the current negative narrative.
Agree and agree but as some analysts have said its more about messaging and especially Parker's comments are sending the wrong message. So far today aal is underperforming and its because aal is under the most domestic and Intl pressure. The message has to change. If its not as bad as you think than Parker went overboard in his comments.
ULCC's and LUV are adding capacity...hopefully demand will be strong enough to counterbalance the added capacity and fare pressure. If revenue still grows it can mitigate prasm weakness...need an airline executive to say as much.
//The only reason this should make ANY airline analyst less bullish is if they believe we're likely to see more irrationality. If you believe that, say that. If you don't, you should probably say something else//
Unfortunately that is what they believe. I really do have concerns per aal being squeezed in a number of areas more so than other airlines. Venny and Brazil just a mess, Intl pressured, number of their domestic hubs are seeing increased competition and noy addressing operational improvements until get thru merger matters. This all started 2q last year and has only gotten worst..making a planeload of money is obviously not enough to offset these challenges as far as the market sees things.
They do make some good points. Per pps targets, they almost always lower them when a stock drops 20% which makes some sense especially because they do not put a timeframe on their targets...
That and one or more of airlines stating that they will not be adding excess capacity, will not be engaging in any old school price wars..just oil dropping may not help as witnessed today. Big part of current selloff due to low fuel undermining capacity restraints. Yup, the proverbial catch 22, double edged swordy stuffy...
Also explains why Parker layed the gauntlet down warning LUV etal that they will pay a price for capacity adds. He is being the good sheriff in town and I think it is the right decision long term.
I think the market is overreacting but this is the airline business so it is understandable and I think that is the point Keay is making. Investors have been burned too many times with airlines and have little patience for bad behavior.
Yes, not greatest time to sell calls but I have quite a bit of sold puts that need to hedge by covering or selling calls. Need a positive catalyst but negative ones such as oil continuing to rise, analyst downgrades are just if not more likely. Really have a hard time seeing pps rebound much or holding any rebound with this type of "fundamental" selloff unlike the Ebola selloff. Dead cat bounce is what I would like to see to sell calls into .
Recent AAL insider selling at 50-55 was definitely the canary in the coal mine. Would be nice to now see some buying at this price level.
Cant recall if she said if/when would track GDP growth and imo street does not trust luv per capacity going forward. LUV needs to make VERY clear that they will get capacity growth under control sooner vs. later. After all luv will have elevated capacity growth well into 2016 based on her comments..its not like its a 1-2 quarter event.
Poor metaphor but basically luv and number of others have to quite whoring around and behave themselves now, not later. Remembr the airlines have a BAD reputation therefore they have to prove they have changed by their actions/deeds.
dca, take out the 4b fuel savings and aal would earn about 3.50 share this year. I think oil will stay low but the street has clearly been discounting the fuel savings. Waiting for my divvy increase , may sell some calls and certainly holding the much lighter bag.
What would really help the industry if the LUV CEO comes out and assures the street that their capacity increases this year and into next year are a short term development and that long term LUV will not grow capacity greater than GDP growth..as Keay said the street will not rerate(higher PE) airlines until they believe capacity and hence cash flow will be stable going forward. There are also a bunch of smaller airlines that are also increasing capacity, not only LUV. It is the issue...I totally agree with him. Street now valuing aal at roughly 6-7x 2016 taxable eps of about 6-7$ share.
A lot of trashing of Keay but he has been spot on with the airlines the last few years and was the first to warn about the capacity risks of very low oil. I clearly remember his warning at EOY but largely because he kept a 65$ pt on aal I took it with a big grain of salt. He's clearly correct per capacity trumping eps etc, if he was incorrect aal would have been trading much higher this year and would not have cratered over the past week.
As he said in the Barron's article, barring an oil collapse(and even that may not help much) airlines are now dead money until the street believes the airlines will be good boys/girls per capacity...
The truth hurts and my accounts are feeling the pain...the horror
Believe he said margins would be somewhere between 2014/2015 and it may have been based on 85$ oil as another poster claimed..profits should still be solid in 2016 and imo oil will stay low barring a MEast blowup..the really good thing is that aal is making record profits, buying back shares, likely increasing divy during this capacity/revenue challenge and merger integration phase. Not the worst of scenario by any means.
The industry will work through it// Agree, unfortunately as stockholders we will have to wait quite awhile most likely for the worm to turn...though we have already been waiting so hopefully some of these matters are already baked in the cake.
Good point, believe that is correct...imo it will be more like 70$ maybe less if get Iran nuclear deal and no MEast blowups which is not looking good right now.