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American Airlines Stock: Can Its Downward Trend Change in 2016?

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Stock movement

Despite being the only airline to take complete advantage of the fuel price declines, American Airlines (AAL) saw one of the worst declines of 2015. This was primarily due to pressure on yields and utilization.

Alaska Air Group (ALK) saw one of the strongest positive stock movements during 2015. Its stock surged by ~40% while the stocks of other legacy players United Continental Holdings (UAL) and Delta Air Lines (DAL) moved by -12% and 4.7%, respectively, in the same timeframe.

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The broader market, tracked by the S&P 500 Index (SPY), dipped slightly by ~2% for the year. As consumers consider airline services to be part of their discretionary spending, airlines must compete for these dollars. We can compare the airlines’ performance with the consumer discretionary sector. The Consumer Discretionary SPDR ETF (XLY) rose by 8% during the year.

However, for 4Q15, American Airlines’ (AAL) stock increased by just 9% as compared to Delta Air Lines’ 13%, Alaska Airlines’ 1.3%, and United Continental Holdings’ 8% gains. American Airlines’ restrained capacity growth and improved utilization in the face of increasing fears of overcapacity in the industry should help to improve investor sentiments. However, industry fundamentals and macroeconomic factors could also impact AAL’s future stock price.

Series overview

American Airlines (AAL) is set to announce its 4Q15 and full year 2015 financial results on Friday, January 29, 2016. The third quarter of 2015 marked AAL’s eight consecutive quarters of record profits. Pretax profits increased by 55% despite a revenue decline of 4%. American Airlines is on track to record another great quarter of profits.

In this series, we will look at what investors can expect for 4Q15 and, more importantly, for 2016. We will also discuss key indicators that investors should identify.

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