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It's been a good week for American Airlines Group Inc. (NASDAQ:AAL) shareholders, because the company has just released its latest annual results, and the shares gained 8.5% to US$17.17. The results look positive overall; while revenues of US$17b were in line with analyst predictions, statutory losses were 5.1% smaller than expected, with American Airlines Group losing US$18.36 per share. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.
Taking into account the latest results, the current consensus from American Airlines Group's 17 analysts is for revenues of US$26.3b in 2021, which would reflect a major 52% increase on its sales over the past 12 months. The loss per share is expected to greatly reduce in the near future, narrowing 74% to US$4.79. Before this latest report, the consensus had been expecting revenues of US$26.9b and US$6.66 per share in losses. Although the revenue estimates have fallen somewhat, American Airlines Group'sfuture looks a little different to the past, with a very promising decrease in the loss per share forecasts in particular.
There was no major change to the US$12.14average price target, suggesting that the adjustments to revenue and earnings are not expected to have a long-term impact on the business. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values American Airlines Group at US$27.00 per share, while the most bearish prices it at US$1.00. We would probably assign less value to the analyst forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. With this in mind, we wouldn't rely too heavily the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.
Of course, another way to look at these forecasts is to place them into context against the industry itself. One thing stands out from these estimates, which is that American Airlines Group is forecast to grow faster in the future than it has in the past, with revenues expected to grow 52%. If achieved, this would be a much better result than the 4.2% annual decline over the past five years. Compare this against analyst estimates for the wider industry, which suggest that (in aggregate) industry revenues are expected to grow 25% next year. Not only are American Airlines Group's revenues expected to improve, it seems that the analysts are also expecting it to grow faster than the wider industry.
The Bottom Line
The most obvious conclusion is that the analysts made no changes to their forecasts for a loss next year. They also downgraded their revenue estimates, although industry data suggests that American Airlines Group's revenues are expected to grow faster than the wider industry. Even so, earnings are more important to the intrinsic value of the business. The consensus price target held steady at US$12.14, with the latest estimates not enough to have an impact on their price targets.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. At Simply Wall St, we have a full range of analyst estimates for American Airlines Group going out to 2024, and you can see them free on our platform here..
You still need to take note of risks, for example - American Airlines Group has 4 warning signs (and 2 which shouldn't be ignored) we think you should know about.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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