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Warren Buffett's American Airlines Slips on Lowered 1st-Quarter Revenue Guidance

- By James Li

American Airlines Group Inc. (AAL), one of Warren Buffett (Trades, Portfolio)'s major airline holdings, tumbled over 3% Tuesday morning on reports that first-quarter revenue guidance could suffer from several factors, including the grounding of the company's Boeing Co. (BA) 737 Max aircraft.

Dow nosedives on earnings trepidation, Boeing continues decline

The Dow Jones Industrial Average traded at an intraday low of 26,110.49, down approximately 230.53 points as investors brace for the beginning of corporate earnings season. Boeing shares tumbled 1.3%, continuing its decline following the company's decision to reduce the 737 Max production rate from 52 airplanes a month to 42 airplanes a month starting in mid-April.


American said in its press release that on March 7, the Dallas-based airline announced the planned removal of 14 Boeing 737-800 aircraft from service for remediation work. The airline also announced it plans to cancel approximately 90 flights per day through June 5 in light of the Federal Aviation Administration's announcement to ground all Boeing 737 Max aircraft. The combination of these factors lowered American's total revenue per available seat mile growth for the quarter from 2% to 1%.


Stock falls on reduced earnings guidance

Shares of American traded at an intraday low of $32.62, down approximately 3.7% from the previous close of $33.88.


GuruFocus ranks American's financial strength 5 out of 10: although the company has a strong Piotroski F-score of 7, the Altman Z-score of 0.98 suggests possible financial distress. Severe warning signs for the airline include increasing long-term debt over the past three years and higher asset growth rate compared to revenue growth rate over the past five years.


Buffett's conglomerate owns 43.7 million shares of American as of the latest portfolio date. Other gurus hoping for better results when American releases its official earnings include PRIMECAP Management (Trades, Portfolio), Bill Nygren (Trades, Portfolio) and Andreas Halvorsen (Trades, Portfolio).

Disclosure: No positions.

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This article first appeared on GuruFocus.