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American Airlines Group (AAL) Up on Raised Q1 TRASM View

Shares of Fort Worth, TX-based American Airlines Group AAL rallied on Apr 11 following a guidance revision. The stock closed the last trading session at $43.93, up 3.8% from the previous day’s closing. The upbeat guidance was issued by the company while releasing its March traffic data.

The carrier posted a decline in air traffic in the month of March. Traffic – measured in revenue passenger miles (RPMs) – was 18.8 billion, down 1.2% from the year-ago figure in the same month.

On a year-over-year basis, consolidated capacity (available seat miles/ASMs) fell 0.9% to 23 billion. Load factor or percentage of seats filled by passengers decreased 200 basis points (bps) to 81.5% due to greater reduction in traffic compared with capacity contraction.

In the first three months of 2017, American Airlines recorded a 1.5% fall in RPMs to 51 billion, while ASMs declined 1.1% to 64.3 billion, both on a year-over-year basis. Also, the load factor declined 400 bps year over year to 79.2%. Moreover, total passenger count (Enplanements) fell 0.5% and 1.2% in the month of March and the first three months of 2017, respectively, from the same period in 2016.

Guidance for Q1 Tweaked

The carrier expects first-quarter 2017 total revenue per available seat mile (TRASM) year-over-year growth of 2–4%, up from the prior 1.5–3.5%. It expects pre-tax margin, excluding special items, in the range of 4–6%, an increase from the original 3–5%. The raised guidance is primarily based on higher yields. First quarter cost per available seat mile (CASM: excluding fuel and special items) is anticipated to increase approximately 8% due to higher labor costs. Average fuel cost per gallon (mainline) is projected in the band of $1.67 to $1.72 per gallon.

Price Performance

Shares of American Airlines gained 3.68% over the last one month, outperforming the Zacks categorized Transportation-Airline industry’s gain of 1.33% over the same period.

The bullish guidance is a further positive for the stock.

Zacks Rank & Key Picks                 

American AirlinesGroupcurrently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the broader transportation sector are Gol Linhas Aereas Inteligentes GOL, Aegean Marine Petroleum Network ANW and Deutsche Lufthansa DLAKY. Gol Linhas and Aegean Marine Petroleum sport a Zacks Rank #1 (Strong Buy), while Deutsche Lufthansa carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of Gol Linhas, Aegean Marine Petroleum and Deutsche Lufthansa gained over 141%, 21% and 30%, respectively, on a year-to-date basis.

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Gol Linhas Aereas Inteligentes S.A. (GOL): Free Stock Analysis Report
 
Deutsche Lufthansa AG (DLAKY): Free Stock Analysis Report
 
American Airlines Group, Inc. (AAL): Free Stock Analysis Report
 
Aegean Marine Petroleum Network Inc. (ANW): Free Stock Analysis Report
 
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